NEW-YORK 


AN 


LIFE   INSURANCE  AGENTS, 


CANVASSERS  AND  SOLICITORS. 


BY  N.  W1LLEY,  ACTUABY. 


C.  C.  HINE, 

07FICBS  OF  THE  INSURANCE  MONITOR  AND   THK   INSURANCE   LAW 

176  BROADWAY,  NEW  YORK. 
187i 


Entered  according  to  act  of  Congress,  in  the  year  1874,  by 

C.  C.  HIKE, 
In  the  office  of  the  Librarian  of  Congress  at  Washington. 


CONTENTS. 


IKTBODUOTION. 

CHAPTER  L 
General  Idea  of  Life  Insurance. 

PAGE 

Insurance  as  a  criterion  of  progress 11 

Life  Insurance  based  upon  the  law  of  average  human  mor- 
tality   12 

Life  Insurance  illustrated  by  Mr.  Wright  as  a  bet 12 

Life  Insurance  a  plain  business  transaction 13 

Life  Insurance  not  a  charity  but  a  duty 14 

Money  value  of  human  life 15 

Magnitude  of  the  business 16 

Life  Insurance  rests  on  solid  foundations — capital,  legal  re- 
strictions, publicity,  public  confidence 17 

CHAPTER  IL 
Life  Insurance  Explained  by  Diagrams. 

Insurance  for  one  year .' ; 20 

Increasing  risks 21 

Term  insurance 22 

"Whole  life  insurance 22 

Single  payment  life 24 

Limited  payment  life  25 

Amount  at  risk 25 

Simple  endowment  insurance 26 

Endowment  insurance 27 

Practical  suggestions 28 

CHAPTER  HI. 
The  Application  and  Policy. 

The  application,  description  of. 30 

How  it  should  be  filled  out 31 

The  policy,  description  of 32 

Different  kinds  of  policies 32 

Whole  life 32 

Limited  payment  life 33 


iv  CONTENTS. 

CHAPTER  IV. 
Habits  and  Qualifications  of  a  Good  Agent. 

PAGE 

Different  kinds  of  policies 32 

Term,  or  temporary 34 

Simple  endowment 35 

Endowment  insurance 35 

Annuities 36 

Payment  of  premiums  and  days  of  grace 37 

Semi-annual  and  quarterly  premiums 37 

Changes  of  policies 37 

Motives  for  accepting  an  agency 39 

Respect  for  his  calling 39 

Appearance  and  manner 40 

Tact 41 

Social  qualities 41 

Cheerfulness 42 

Good  temper 43 

Perseverance 43 

Enthusiasm , 44 

Honesty  in  soliciting 44 

Consequences  of  misrepresentation 46 

Some  companies  insist  on  the  truth  being  told 47 

Character  in  an  agent 48 

CHAPTER  V. 

Information  Needed  by  the  Agent. 

Should  know  what  insurance  is 50 

Adaptation  of  different  plans 51 

New  plans  and  features 52 

Agent  must  instruct  the  public 53 

Should  read  insurance  books  and  papers 53 

Need  not  be  an  actuary  54 

Should  understand  interest  and  discount 55 

Well  posted  about  his  own  company 55 

Knowledge  of  human  nature 56 

CHAPTER  VL 

What  to  Avoid. 

Toomuch  talking 58 

Denouncing  other  companies 59 

Advising  unprofitable  plans 61 

Odd  forms  of  insurance 61 

Extravagant  statements 62 

Newspaper  criticisms 63 

Bogus  insurance  companies 63 

Unnecessary  expenditures 64 

Brokerage 65 

Rebate 65 

Intemperate  men  as  risks 66 

Improper  use  of  leaflets,  etc 66 


CONTENTS.  v 

CHAPTER  VII. 
Choosing  a  Company. 

PAGE 

Old  and  New  Companies 68 

Mntual,  mixed  and  stock  companies , 69 

Character  and  standing  of  the  officers 70 

New  plans  of  insurance 71 

Different  methods  of  paying  t'.ie  premiums 71 

Different  methods  of  returning  the  surplus 71 

Different  privileges  and  restrictions 71 

Method  of  doing  business 72 

Reputation  of  the  company  among  its  policy-holders 73 

Past  history  of  the  company 73 

Agents  should  work  only  for  good  companies 73 

CHAPTEE  VIII. 
The  Company. 

The  President  and  Vice  President 75 

The  Secretary ; ; 76 

The  Medical  Examiner 76 

The  manager  of  agencies 77 

Devotion  to  the  company 78 

Influence  of  agents  on  a  company's  reputation 78 

Contracts  with  the  company 79 

Commuted  commissions 79 

CHAPTER   IX. 

The  Agency. 

The  field 81 

Office  headquarters '. . .  82 

Making  a  specialty  of  insuring  certain  classes 82 

Agent  should  build  on  a  solid  foundation 82 

Securing  the  influence  of  prominent  men 83 

Minister  of  a  parish 84 

Owners  of  factories,  etc 84 

Influence  of  the  medical  examiner 84 

Other  events 85 

Advertising 85 

How  to  make  an  agency  pay 86 

Should  endeavor  to  excel  all  other  agencies 86 

The  reward  of  a  successful  agent 87 

CHAPTER  X. 
Accounts  with  the  Company. 

Monthly  statements 88 

Office  books,  etc 88 

Careless  agents 89 


vi  CONTENTS. 

CHAPTER  XL 
Soliciting. 

PAGE 

No  uniform  rules  can  be  given 90 

Introductions 91 

A  suitable  opportunity 92 

Stating  the  business 92 

Arguments  should  be  adapted  to  the  condition  of  the  person 

solicited 93 

Prepared  to  meet  the  objections 94 

Religious  scruples 95 

Is  life  insurance  a  safe  investment  ? 96 

Rich  enough  already 97 

In  debt 97 

The  money  is  needed  for  business  purposes 97 

The  money  spent  for  insurance  is  lost 98 

No  one  dependent  on  him ,    98 

Some  other  time  will  do  as  well 98 

The  policy  may  lapse 99 

Reasons  for  insuring 99 

Life  is  uncertain 99 

Unwise  to  defer 100 

Life  insurance  adds  to  the  length  of  one's  life 100 

Every  man  can  leave  his  family  free  from  want 100 

Immediate  provision  for  the  family  in  case  of  death 101 

Views  of  Hon.  Elizur  Wright 101 

Provision  against  old  age 102 

Money  value  of  a  policy 102 

A  safe  investment 103 

Examples  of  our  best  financiers 103 

One  plan  of  insurance 103 

Filling  up  the  application 104 

Medical  examinations 104 

Remarks  of  Dr.  Allen 108 

Delivering  the  policy 105 

Semi-annual  and  quarterly  premiums 105 

"  Not-taken  "  premiums 106 

Small  policies 106 

Habits  and  occupation  of  parties  seeking  insurance 107 

CHAPTER  XII. 
The  Policy-holder. 

The  agent's  friend  and  assistant 109 

Policies  should  not  be  allowed  to  lapse 109 

Over-insurance  a  cause  of  lapses Ill 

Settlement  of  claims...  ..Ill 


CHAPTER  xm. 

Surrender  Values  and  Paid-up  Policies. 

Surrender  values  a  source  of  dissatisfaction  among  policy, 
holders ,  ..  US 


CONTENTS.  vii 

PAdE 

Actual  and  tabular  cost  of  insurance 114 

Net  values  and  surrender  values 116 

What  is  a  policy  ? 115 

Payment  of  surrender  values  now  generally  adopted 116 

Why  companies  cannot  pay  the  whole  of  the  reserve  as  the 

surrender  value 118 

Practical  illustrations 119 

Why  companies  cannot  pay  a  surrender  value  at  the  end  of 

the  first  year 121 

Illustrations 121 

Effect  of  premium  notes  and  loans  on  surrenders 123 

Ten  annual,  life  and  endowment  policies 123 

Illustrations 124 

Paid-up  policies • 127 

Little  gained  by  lapsed  policies 128 

CHAPTER  XIV. 

Distribution  of  Surplus. 

The  premiums 130 

Mortality 130 

Interest 131 

Margin,  or  loading 131 

Period  of  distribution 132 

Methods  of  distribution 133 

Percentage  on  premiums 133 

Percentage  on  reserves 134 

Contribution  plan 134 

Its  first  application,  by  whom 134 

Cost  of  insurance  explained 134 

Cost  of  insurance,  table  of. 135 

Illustration  of  contribution  plan 135 

Application  of  surplus 137 

Reduction  of  next  premium 137 

Reversionary  insurance , 137 

Purchase  of  term  insurance / . . .  137 

Purchase  of  term  insurance,  tables  of. 138 

Advantages  and  defects  of  different  methods  of  applying  the 

surplus 138 

Tontine  dividend  insurance  explained 139 

A  triple  bet 140 

Table  illustrating  accumulation  of  dividends 142 

Explanation  of  the  table 143 

Advantages  and  disadvantages 141 

Savings  bank  insurance 146 

Table  illustrating,  by  Mr.  Wright 146 


CHAPTER  XV. 

The  Law  of  Life  Insurance. 

Powers  of  corporations 148 

Powers  and  duties  of  agents 149 

Agent's  relation  with  the  company 151 

Insurance  brokers 152 

The  law  of  contracts. . .  153 


viii  CONTENTS. 

PAGE 

Life  insurance  not  au  indemnity 156 

Payment  of  premiums  167 

Delivery  of  policy...- 158 

Warranty  and  representation 158 

Insurable  interest 160 

Waiver 161 

Assignment 162 

Prospectus 163 

Policy-holder  not  heard  from 164 

Violation  of  conditions 164 

Bights  of  married  women 166 

Suicide ..  166 


INTRODUCTION. 


THIS  manual  is  prepared  for  the  purpose  of  educat- 
ing life  insurance  agents  to  a  higher  appreciation  of 
their  duties  and  responsibilities,  and  to  give  them  some 
practical  information  which  will  enable  them  not  only 
to  be  more  successful  in  obtaining  new  business,  but 
also  in  winning  the  respect  and  confidence  of  the  pub- 
lic. The  duties  and  responsibilities  of  agents  have 
hitherto  been  almost  wholly  confined  to  the  task  of  get- 
ting new  business.  Too  many  have  gone  into  the  field 
with  no  other  motive  or  aim  than  to  reap  a  harvest  of 
first  commissions,  without  caring  whether  the  best  in- 
terests of  policy-holders  were  consulted  ;  too  many 
officers  of  life  companies  have  made  the  number  and 
amount  of  new  applications  the  only  criterion  of  excel- 
lence in  an  agent  ;  too  many  applications  have  been 
written  in  a  careless  or  perhaps  designedly  incorrect 
manner  ;  and  when  a  policy  based  upon  such  represen- 
tations has  become  a  claim,  the  payment  has  often  been 
resisted  on  account  of  the  ignorance  or  irregularity  of 
the  agent.  In  these  instances  the  officers  of  compa- 
nies have  been  equally  responsible  ;  they  have  acted  as 
if  new  applications,  like  a  mantle  of  charity,  covered  a 
multitude  of  sins.  But  the  loss  of  insurance  during  the 
past  few  years  equal  to  seventy  or  eighty  per  cent,  of 
the  new  business,  in  lapses,  surrenders,  and  not-taken 
policies,  ought  to  suggest  the  importance  of  reform. 
When  it  takes  place,  honor  and  truthfulness  will  be  the 
first  requisites  of  a  solicitor. 

Most  agents  need  some  practical  hints  about  their 
business  to  enable  them  to  succeed.  Life  insurance 
has  become  a  science  which  few  thoroughly  under- 
stand, but  all  should  be  tolerably  familiar  with  its  lead- 
ing principles.  It  appears  to  be  a  practical  absurdity 
for  a  man  to  commence  soliciting,  knowing  nothing  of 
the  different  plans  of  insurance,  the  effect  of  different 
premium  rates,  or  of  the  relative  advantages  of  the  pe- 
culiar features  of  the  different  companies  ;  or  to  at- 
tempt to  build  up  a  business  where  the  details  and  mi- 
nutiae are  all  to  be  learned.  It  is  a  waste  of  time  and 
patience  for  an  agent  to  persuade  people  to  appreciate 
the  benefits  of  life  insurance  when  its  principal  advan- 


10  INSTRUCTION  BOOK 

tages  and  characteristics  are  unknown  to  him,  and  it  is 
Btill  more  difficult  to  compete  with  other  agents  who 
have  made  this  subject  a  special  study.  The  young  at- 
torney has  spent  months,  and  perhaps  years,  in  learn- 
ing the  routine  of  a  lawyer's  office,  in  attending  courts 
and  gaining  a  practical  knowledge  of  his  profession  ; 
the  young  doctor  has  spent  his  time  in  hospitals,  dis- 
secting-rooms, and  in  the  office  of  a  practicing  physi- 
cian till  he  has  obtained  the  knowledge  and  experience 
•which  will  enable  him  to  succeed.  In  every  kind  of 
business  its  general  principles  and  practical  operation 
must  be  learned  before  one  can  hope  to  meet  with  suc- 
cess. Eventually  it  will  be  so  regarded  in  life  insur- 
ance. A  class  of  men  will  be  carefully  trained  to  the 
business,  and  while  they  devote  their  lives  to  this  call- 
ing, they  will  make  themselves  so  familiar  with  the 
science  that  they  can  advocate  it  successfully  without 
having  recourse  to  deception  or  without  fear  of  mis- 
take. 

1  he  agent  must  first  be  educated  in  this  manner  in 
order  to  be  properly  appreciated  and  trusted  by  the 
public.  An  ignorant  agent  making  preposterous  state- 
ments about  the  infinite  results  of  a  series  of  finite  pre- 
miums, and  the  working  of  particular  plans,  may  suc- 
ceed for  a  time,  but  his  prosperity  will  be  an  ephe- 
meral one.  Ere  long  the  policy-holders  will  find  that 
they  have  been  deceived,  his  expected  success  is  not 
realized,  and  lapses,  forfeitures  and  surrender  values 
will  be  the  results.  But  when  life  insurance  is  proper  • 
ly  explained,  and  its  truths  are  clearly  unfolded ,  how 
beautiful  the  harmony  of  the  mathematical  principles 
involved  !  how  convincing  the  duty  to  insure  !  how  easy 
to  see  where  the  greatest  advantage  lies  !  and  how  sat- 
isfactory to  know  that  the  agent  consults  the  interests 
of  the  policy-holder  as  well  as  his  own  ! 

The  principal  requisite  to  success  in  any  business  is 
a  general  love  for  it.  Unless  an  agent  feels  an  enthu- 
siasm in  his  work,  unless  he  believes  he  is  conferring  a 
great  advantage  on  the  insured  by  his  efforts,  unless  he 
goes  forth  in  the  anxious  pride  of  one  who  means  to 
win,  then  he  has  mistaken  his  calling.  But  he  cannot 
be  heartily  in  love  with  it  till  he  understands  it — till  he 
is  familiar  with  all  the  arguments  which  can  be  used 
for  and  against  it,  and  until  he  is  able  to  instruct  those 
he  wishes  to  convince.  In  soliciting,  "  knowledge  is 
power,"  and  the  agent  who  thoroughly  knows  what  his 
duties  are,  and  how  to  perform  them  acceptably,  will  be 
the  most  enthusiastic  and  the  most  successful. 


CHAPTER    I. 

GENERAL    IDEA    OP    LIFE    INSURANCE. 
Insurance  a  Criterion  of  Progress. 

INSTTEANCB  of  all  kinds  is  a  natural  result  of  modern 
civilization.  It  is  based  upon  two  well-known  facts: 
that  we  are  exposed  to  the  occurrence  of  certain  mis- 
fortunes, such  as  having  our  buildings  burned,  our  ships 
lost  by  storms,  and  our  lives  destroyed;  and  secondly, 
that  these  misfortunes  happen  with  considerable  regu- 
larity in  classes  containing  a  large  number  of  members. 
The  insurance  consists  in  the  unfortunate  members  of 
these  classes  being  recompensed  for  their  losses  by  the 
contributions  or  premiums  of  others  who  are  fortunat  e 
enough  to  escape  a  similar  calamity.  Hitherto  man- 
kind has  not  succeeded  in  preventing  these  occurrences. 
Fires  will  break  out  and  reduce  valuable  buildings  to 
ashes.  Ships  will  be  wrecked  notwithstanding  all  dis- 
coveries in  meteorology.  People  will  die  from  accident 
and  disease  before  they  have  fulfilled  their  allotted  three 
score  years  and  ten,  in  spite  of  all  discoveries  in  medi- 
cine or  hygiene.  These  things  happen  every  day,  and 
the  only  way  to  make  good  the  losses  which  they  entail 
is  for  a  large  number  of  people  exposed  to  any  kind  of 
disaster  to  combine  together,  and  for  those  who  escape 
to  join  in  paying  a  definite  amount  of  the  loss  to  those 
who  suffer. 

To  discover  the  laws  which  govern  the  occurrence  of 
these  disasters,  requires  an  amount  of  labor  in  collect- 
ing statistics,  science  in  reducing  them  to  nearly  uni- 
form principles,  and  public  confidence  in  binding  the 
policy-holders  together,  which  is  found  only  in  highly 
civilized  countries.  The  ancients  knew  nothing  of  in- 
surance ;  half  civilized  nations  do  not  practice  it  ;  they 
have  not  made  sufficient  intellectual  advancement  to 
enable  them  to  collate  the  facts  and  master  the  princi- 
ples necessary  to  reduce  insurance  to  a  scientific  basis. 
Only  the  most  enlightened  nations  insure  to  any  great 
extent. 

Insurance,  then,  may  be  regarded  as  a  criterion  of  mo- 
dern progress,  and  life  insurance  as  an  example  of  its 
highest  development.  No  other  kind  of  insurance  is 
based  upon  such  exact  laws  or  requires  such  profound 


12  INSTRUCTION  BOOK 

mathematical  principles  for  its  complete  investigation, 
and  none  other  is  so  important  to  a  community,  so  lit- 
tle understood,  or  so  universally  neglected. 

Life  Insurance  based  upon  the  Law  of  Average 
Human  Mortality. 

The  law  which  lies  at  the  basis  of  all  computations  in 
life  insurance  is,  that,  in  a  large  class  of  individuals  of  a 
certain  age,  we  can  predict  with  considerable  certainty 
how  many  will  die  within  a  definite  period  of  time.  We 
cannot  tell  whether  any  particular  individual  will  live 
or  die  during  any  future  period,  but  a  large  number  of 
persons,  taken  at  any  given  age,  loses  its  members  in 
such  regular  order  that  we  are  compelled  to  acknow- 
ledge that  there  is  a  law  of  human  mortality  to  which 
the  facts  in  every-day  life  conform  to  a  remarkable  de- 
gree. If  a  person  puts  1,000  white  beans  in  a  bag,  and 
then  adds  100  black  ones,  and,  after  the  bag  is  fairly 
shaken ,  a  blindfolded  man  proceeds  to  draw  them  out 
one  by  one,  it  will  be  found  that  in  drawing  a  limited 
number,  the  probability  that  he  will  draw  a  white  bean 
is  just  ten  times  as  great  as  that  he  will  draw  a  black 
one.  This  is  an  illustration  of  the  principle  upon  which 
.nil  tables  of  mortality  are  based.  Mr.  Elizur  Wright 
illustrates  the  contract  of  life  insurance  by  calling  it  a 
bet — unfortunately,  so  far  as  nomenclature  is  concerned, 
because  betting  is  intimately  associated  with  gambliilg, 
•whereas  there  is  nothing  essentially  like  gambling  in 
insurance .  A  man  aged  25  ' '  bets  "  $20  that  he  will 
die  within  a  year,  and  he  makes  a  still  further  bargain 
that  he  shall  have  the  privilege  of  renewing  this  "  bet" 
once  a  year  diiring  life.  The  company  "  bets  "  that  the 
man  will  not  die,  and  stakes  $1,000  on  the  result.  The 
company  has  a  table  of  mortality  prepared,  which 
shows  how  many  will  probably  die  out  of  a  thousand 
for  each  successive  year  of  age  from  10  years  to  95  or 
100,  and  having  converted  this  average  annual  risk  into 
a  uniform  rate  through  life,  and  added  a  margin  for  ex- 
penses and  contingencies,  it  is  ready  to  bet  $1,000 
against  a  premium  of  $20  that  he  will  not  die.  The 
policy-holder  puts  up  his  $20  per  annum,  and  the 
longer  he  lives  the  more  likely  he  is  to  win.  The  com- 
pany will  lose  the  "  bet "  in  the  end  ;  but  if  it  obtains 
premiums  and  interest  thereon  enough  in  the  mean- 
time to  recompense  it  for  the  sum  insured,  and  losses 
paid  on  others  of  the  same  age,  it  is  the  gainer.  The 
same  principle  holds  good  in  fire  insurance.  A  man 
"  bets  "  a  certain  sum — say  one  per  cent  or  $50 — that 


FOR  LIFE  AGENTS.  13 

his  house,  valued  at  $5,000,  will  be  consumed,  and  the 
company  "bets"  $5,000  that  it  will  not.  Now  sup- 
pose that  there  are  several  thousand  people  making  just 
such  "bets."  In  so  large  a  class,  a  company  can  easily 
find  out  what  is  the  average  ratio  of  loss,  and  how  high 
the  premium  will  have  to  be  made  to  bear  it  and  pay 
all  working  expenses. 

Life  Insurance  a  Plain  Business  Transaction. 

When  we  reduce  life  insurance  to  its  elementary  prin- 
ciples, we  find  that  it  is  a  plain  business  matter.  The 
idea  that  it  is  a  benevolent,  charitable  or  sacred  institu- 
tion, the  protector  of  the  widow  and  orphan,  is  an  error 
which  has  been  cherished  altogether  too  long.  There 
is  no  more  benevolence  or  charity  in  it  than  there  is  in 
a  savings  bank  which  pays  its  depositors  when  they  de- 
mand their  deposits.  Nor  is  there  any  more  benevo- 
lence or  charity  in  a  man's  insuring  his  life  for  the  ben- 
efit of  his  family  than  there  is  in  his  providing  them 
with  food  and  raiment.  It  is  his  duty  to  provide  for 
them  as  well  as  he  knows  how,  and  if  he  is  convinced 
that  life  insurance  is  one  of  the  means  whereby  this 
can  be  accomplished,  then  he  is  unfaithful  to  his  trust 
if  he  does  not  take  advantage  of  it.  Nor  is  a  life  insur- 
ance company  a  benevolent  or  charitable  corporation 
because  it  pays  its  losses  promptly.  Paying  losses  is  a 
part  of  the  contract  of  insurance,  as  paying  for  goods 
purchased  is  a  part  of  the  duties  of  mercantile  life.  It 
may  be  considered  a  heresy  to  expose  a  fallacy  on  which 
so  many  solicitors  have  depended  for  their  arguments, 
and  on  which  so  much  has  been  written  in  favor  of  life 
insurance  ;  but  this  is  the  simple  truth,  and  the  sooner 
it  is  generally  understood  the  better.  Life  insurance 
has  depended  too  much  for  its  success  upon  sympathy, 
misrepresentation  and  mystery,  which  is  the  cause  of  so 
much  dissatisfaction  and  disappointment  among  policy- 
holders. 

Since  life  insurance  companies  are  purely  business 
organizations,  they  must  be  conducted  on  sound  busi- 
ness principles.  In  order  to  live  and  prosper,  they 
should  protect  themselves,  or  rather  their  policy-hold- 
ers, against  fraudulent  claims,  extravagance,  and  ev- 
erything which  hinders  their  successful  operation.  A 
company  which  does  not  is  unworthy  of  confidence  and 
patronage,  and  so  when  the  public  or  some  ignorant  ed- 
itor blames  a  life  insurance  company  for  contesting  a 
claim  which  is  evidently  fraudulent,  or  for  refusing  to 
defraud  the  remaining  policy-holders  by  paying  too  lib- 


14  INSTR UCTION  BOOK 

eral  surrender  values,  he  is  discussing  matters  which  ha 
does  not  understand.  The  company  is  designed  to  be- 
nefit those  policies  which  remain  in  force  in  preference 
to  those  which  drop  out,  and  honest  policy-holders  in- 
stead of  derelicts. 

Life  Insurance  not  a  Charity,  but  a  Duty. 

But  although  life  insurance  is  strictly  a  business  mat- 
ter on  the  part  of  the  company,  it  has  a  grand  and  no- 
ble mission  to  perform.  On  the  part  of  the  policy- 
holder  it  appeals  to  the  noblest  and  tenderest  feelings 
of  bis  nature.  The  care  of  those  dependent  upon  him; 
the  protection  of  offspring  ;  the  careful  preparation  for 
the  support  of  loved  ones,  years  after  the  grave  shall 
have  covered  the  strong  arm  which  labors  and  the  man- 
ly heart  which  sympathizes  with  them — this  is  the 
great  mission  of  life  insurance,  and  to  this  end  should 
all  its  energies  be  directed.  It  is  not  a  legitimate  sub- 
ject of  speculation.  If  men  insure  their  lives  to  make 
inoney  on  the  investment,  it  is  because  they  know  that 
they  are  short-lived,  or  because  they  have  erroneous 
views  on  the  subject  of  profits.  If  they  know  that 
they  are  short-lived,  and  get  into  a  company  by  making 
deceptive  representations,  they  intend  to  defraud  the 
remaining  policy-holders.  If  they  insure  as  an  invest- 
ment, and  live  to  a  good  old  age,  they  obtain  a  moder- 
ate interest  on  their  money,  less  the  tabular  cost  of  in- 
surance. 

But  passing  over  these  baser  motives,  there  is  much 
real  solid  good  done  by  insurance.  It  tends  to  length- 
en a  man's  life  by  giving  him  that  assurance  in  the  hour 
of  sickness  that  his  family  is  provided  for  in  the  event 
of  his  death  ;  it  inculcates  habits  of  economy  and  self- 
denial  by  compelling  him  to  set  aside  a  part  of  his  in- 
come to  purchase  a  future  benefit;  it  discourages  intem- 
perance as  one  of  the  means  by  which  a  policy  may  be 
lost,  and  by  placing  the  policy-holder  under  bonds  not 
to  die  by  intoxication  ;  and  finally,  its  whole  tendency 
is  to  furnish  him  with  the  noblest  impulses  of  action, 
which  any  mere  business  or  selfish  motive  can  bestow. 
There  is  no  charity,  no  benevolence  in  this.  None  of 
the  saintly  virtues  which  some  writers  love  to  proclaim 
in  advocating  life  insurance  ;  but  there  is  an  honest 
performance  of  duty  ;  there  is  a  preparation  for  death 
as  far  as  worldly  matters  are  concerned ,  and  there  is 
the  exercise  of  that  forethought  which  distinguishes  a 
civilized  man  from  a  savage,  or  prudence  from  reckless- 
ness. The  man  who  is  insured  in  a  sound  and  pros- 


FOR  LIFE  AGENTS.  15 

porous  company  has  the  feeling  of  security  for  the  wel- 
fare of  his  family  in  case  of  sudden  death,  and  this  may 
be  a  boon  whose  value  cannot  be  estimated  in  dollars 
and  cents. 

There  is  many  a  man  who  would  hardly  rest  a  single 
night  if  his  factory,  warehouse  or  store  were  not  in- 
sured to  its  full  value  ;  but  who  will  recklessly  expose 
himself  to  death  while  his  affairs  are  in  a  chaotic  con- 
dition, with  no  certain  provision  for  his  family — no  in  • 
surance  on  his  life.  Men  do  not  refuse  to  pay  money 
for  other  objects  of  a  similar  nature.  We  live  in  a  civ- 
ilized country  where  there  are  laws,  civil  officers,  courts 
and  policemen.  We  can  sleep,  knowing  that  there  are 
watchmen  to  protect  our  property  from  being  stolen  or 
destroyed.  We  can  travel  by  day  and  night,  knowing 
that  the  arm  of  the  law  will  protect  us,  and  for  these 
blessings  we  cheerfully  pay  taxes  ;  but  in  all  this  there 
is  no  insurance,  only  an  imperfect  protection.  We  in- 
sure our  buildings  against  lire,  when  not  one  building 
in  a  hundred  burns,  and  we  pay  our  fire  insurance  pre- 
miums promptly  and  cheerfully;  and  sometimes,  after  u. 
great  deal  of  argument  and  solicitation,  and  too  often 
with  an  idea  that  it  is  a  good  speculation,  we  insure  our 
lives.  Let  us  hope  that  hereafter  agents  will  divest  life 
insurance  of  ail  its  clap-trap  and  sentimentalism,  and 
look  at  it  as  a  plain,  straightforward  bargain  on  the 
part  of  the  company,  and  a  simple  duty  of  the  policy- 
holder. 

Money  Value  of  Human  Life. 

Some  people  have  the  idea  that  life  insurance  is  a 
speculation  on  a  man's  life,  and  is  wrong,  inasmuch  as 
human  life  is  too  solemn  and  serious  a  thing  to  be  made 
the  subject  of  any  such  contract.  It  is  just  here  that 
the  whole  thing  is  greatly  misunderstood.  A  man 
takes  a  life  insurance  policy,  so-called,  of  $10,000.  It 
is  not  his  life  which  is  insured  against  death,  so  much 
as  it  is  the  value  of  his  services;  he  insures  that  quality 
in  him  which  is  necessary  to  support  his  family.  That 
is  his  income-producing  power,  or  capacity  to  earn  mo- 
ney. Men  who  are  physically  disabled,  and  who  have 
no  ability  to  support  themselves  and  others,  such  as  the 
insane,  the  badly  crippled,  or  those  in  premature  do- 
tage, cannot  get  insured  if  the  company  is  aware  of 
their  condition,  even  if  their  health  is  good,  because  there 
is  no  money  value  to  their  lives.  But  if  a  healthy  man 
gets  killed  by  a  railroad  accident,  his  friends  bring  an 
action  against  the  company  and  get  damages,  say  $5,000. 


16  INS  TR  UCTION  B  0  OK 

This  is  the  sum  which  they  claim  is  the  money  value  of 
that  man's  future  services  to  his  family. 

So  in  life  insurance  ;  a  man  insures  his  money  value 
as  a  producer,  or  as  much  of  it  as  he  can  afford.  This 
is  a  kind  of  property  which  the  law  protects . 

If  a  man  starts  a  malicious  rumor  or  report  against  a 
merchant  or  doctor,  which  injures  his  business  and  di- 
minishes his  income,  the  law  gives  a  remedy  and  the 
slandered  man  brings  a  suit  for  damages  against  the  of- 
fender, because  a  man's  income-producing  power  is  just 
as  much  his  property  as  his  bank  account.  Suppose  a 
man  gets  a  salary  of  $2,000  a  year  ;  the  present  value 
of  it  at  six  per  cent,  discount — if  he  were  sure  of  living 
and  earning  it  for  twenty  years — is  $23,000.  This  is 
his  income-producing  value  as  a  man,  and  this  is  what 
he  insures  when  he  takes  a  life  policy.  There  is  no 
more  speculation  in  this  than  there  is  in  his  insuring 
his  house  or  factory,  and  his  duty  is  just  as  plain  in  one 
case  as  in  the  other.  If  a  man  has  a  machine  which 
will  earn  $2,000  a  year  for  twenty  years,  and  if  that 
machine  should  be  destroyed  by  fire,  and  he  could  not 
get  another  under  any  circumstances ,  he  would  instant- 
ly have  it  protected  by  a  fire  policy  to  its  full  value.  We 
have  taken  this  view  of  life  insurance  because  we  be- 
lieve that  when  it  is  stripped  of  all  its  mystery  and 
false  claims  upon  the  public,  and  is  presented  as  a  sim- 
ple business  matter,  obligatory  upon  all  men  to  the  ex- 
tent of  the  risk  which  they  run,  the  money  value  of 
their  services,  and  the  amount  of  annual  income  they 
can  spare  for  this  purpose,  then  the  objections  against 
life  insurance  will  be  confined  mainly  to  the  stability  of 
the  companies. 

Magnitude  of  the  Business. 

Hardly  any  business  in  the  United  States  has  in- 
creased so  rapidly  during  the  last  ten  years  as  life  insur- 
ance. It  has  taken  so  strong  a  hold  upon  the  public 
confidence,  and  has  become  so  firmly  established,  that 
it  is  now  recognized  as  one  of  the  leading  subjects  of 
financial  investigation .  Our  prominent  companies  have 
been  in  operation  twenty  or  thirty  years,  and  have  ac- 
quired a  solid  reputation  for  stability  and  honesty. 
Many  of  them  are  as  sound  and  safe  as  the  best  banks 
in  the  United  States,  and  their  assets  are  reckoned  at 
from  one  to  sixty  millions.  There  are  now  more  than  a 
hundred  life  insurance  companies  in  active  operation  in 
this  country.  The  returns  of  sixty-four  of  them,  com- 
prising all  those  doing  business  in  New  York,  and  one 


FOR  LIFE  AGENTS.  17 

or  two  more,  and  as  given  below,  show  their  condition 
and  standing  December  31st,  1871,  and  in  comparison 
we  give  the  condition  of  all  the  companies  doing  busi- 
r.ess  in  New  York  just  ten  years  previous  : 

Condition  Condition 

Dec.  31, 1S61.  Dec.  31,  1J71. 

Companies 17  64 

Policies  in  force 57,202  781,618 

Insurance  in  force $164,256,052  $2,081,942,007 

Gross  Assets, 26,670,397  307,087,91 7 

Income,  1871, 4,913,390  113,320,838 

Payments  of  Losses  and  \       n  .„.  7q1  91  .„,  o™ 

Endowments,  j  ..  .1,535.791  21,47o,362 

Dividends  to  Policy-holders, 21,936,991 

From  this  statement  we  see  that  the  amount  of  busi- 
ness has  become  more  than  ten  times  as  great  as  it  was 
ten  years  ago.  Since  it  has  acquired  such  gigantic  pro- 
portions it  is  impossible  either  to  ignore  it  or  to  stay  its 
onward  progress. 

Such  a  business  could  never  have  been  built  up  un- 
less the  managers  of  these  companies  had  the  implicit 
confidence  of  the  people,  and  nothing  can  destroy  it 
but  a  general  want  of  public  confidence,  caused  by  a 
gross  mismanagement. 

Life   Insurance  rests  on  Solid   Foundations. 

The  public-  confidence  upon  which  the  whole  business 
of  life  insurance  depends,  rests  upon  four  solid  founda- 
tions, every  one  of  which  is  yearly  meeting  with  the 
most  decisive  tests  : 

The  first  foundation  is  capital.  Life  insurance  has. 
money  for  its  basis.  The  assets  of  our  leading  lite  in- 
surance companies  range  from  five  to  sixty  millions  of 
dollars  ;  nearly  all  this  is  invested  in  interest-bearing 
securities.  These  assets  are  safely  invested.  No  sav- 
ings bank  in  the  country  takes  more  pains  or  exercises 
greater  care  in  the  investment  of  funds  than  our  life  in- 
surance companies.  Many  of  these  companies  have 
never  lost  a  dollar  from  poor  investments,  although 
many  millions  have  been  entrusted  to  their  care.  Dur- 
ing the  year  1871  half  a  dozen  savings  banks  failed  in 
the  city  of  New  York,  occasioning  a  loss  to  the  depos- 
itors of  upwards  of  $500,000,  while  the  life  companies 
stand  firmer  than  ever. 

The  second  foundation  is  the  LEGAL  EESTEICTION 
which  is  thrown  around  life  insurance  companies.  No- 
other  corporation  is  so  jealously  watched  and  guarded 
as  this.  Savings  banks,  banks  of  issue,  and  trust  com- 
panies, can  do  more  as  they  please  with  their  de- 
posits or  fund  ;  but  the  life  insurance  companies  are 


18  INSTIt  UCTION  B 0  OK 

held  to  the  strict  letter  of  the  law  and  watched  with  a 
jealous  eye.  In  every  State  in  the  Union  where  life  in- 
surance companies  are  organized,  and  where  there  is  an 
Insurance  Department,  they  are  prohibited  from  in- 
vesting their  funds  in  any  speculative  or  doubtful  se- 
curity.* They  must  keep  up  the  required  standard  of 
reserve  as  prescribed  by  law.  All  new  companies  must 
have  a  capital  slock  of  at  least  $100,000,  and  usually 
this  must  be  deposited  -with  a  State  official  to  secure  the 
prompt  payment  of  all  just  claims. 

The  third  is  PUBLICITY.  The  annual  sworn  statement 
of  the  condition  and  standing,  including  the  business 
done,  assets,  liabilities,  receipts,  expenditures,  and 
losses  of  every  company  doing  business  in  a  State 
•where  there  is  an  Insurance  Department,  must  be  ex- 
amined by  a  competent  State  official,  and  published  in 
an  official  manner,  and  every  agent  and  citizen  has  an 
opportunity  to  read  these  reports  understandingly  and 
critically.  Contrast  this  trait  of  our  companies  with 
the  condition  of  life  companies  in  England,  where 
so  many  failures  have  occurred  in  life  insurance,  and 
where  they  are  still  occurring.  There  secrecy  of  ad- 
ministration is  the  rule  ;  the  internal  condition  and 
working  of  every  company  is  carefully  hid  from  the 
public  eye,  and  the  policy-holder  or  agent  knows  noth- 
ing but  the  "glittering  generalities"  of  assets  and  pol- 
icies in  force  which  the  directors  and  officers  please  to 
publish,  till  suddenly,  like  a  thunderbolt  in  a  clear  sky, 
a  crash  like  the  failure  of  the  Albert  or  the  European 
sends  consternation  and  dismay  among  thousands  of 
homes. 

The  fourth  is  PUBLIC  CONFIDENCE.  There  is  a  grow- 
ing conviction  among  men  that  it  is  their  duty  to  in- 
sure their  lives  in  sound  companies.  Life  insurance  is 
not  now  regarded  as  a  rich  man's  luxury,  but  it  is  the 
poor  man's  shield.  The  constantly  recurring  cases 
of  men  dying  and  leaving  policies  of  insurance  to  be 
paid  to  their  families  a  short  time  after  their  death,  is 
having  its  effect  on  the  minds  of  thousands  who  never 
would  have  had  any  confidence  in  it.  Well-known  ex- 
amples and  every-day  illustrations  are  the  most  convinc- 
ing of  all  arguments.  Our  great  companies,  which  have 
weathered  through  a  score  of  years  without  disappoint- 
ing their  policy-holders,  are  examples  of  this  kind  of 
confidence.  No  one  questions  their  soundness  or  abil- 
ity to  pay  their  losses  as  they  mature,  and  most  of  the 
younger  companies  are  following  their  footsteps  and 
reaping  the  same  kind  of  reward.  Public  confidence  is 
the  vital  health  of  a  life  insurance  Company  ;  without 


FOR  LIFE  AGENTS.  19 

it  is  paralyzed  ;  with  it  it  can  defy  commercial  crises, 
aiid  when  the  money  market  is  stringent,  it  can  lend  a 
helping  hand  to  those  policy-holders  who  are  pressed  by 
temporary  embarrassment.  But  how  is  it  with  a  bank 
of  issue  in  a  commercial  crisis  ?  Will  it  ease  the  mo- 
ney market  and  accommodate  depositors  by  making 
loans  any  more  readily  ?  Not  at  all.  Every  year  the 
public  confidence  in  life  insurance  companies  is  growing 
stronger.  They  may  change  their  plans  and  rates  of  in- 
surance in  order  to  keep  up  with  new  discoveries  in 
the  science,  but  the  time  has  come  when  they  are  firm- 
ly established  iu  the  confidence  of  the  people — the  firm- 
est foundation  of  all. 


20 


INSTRUCTION  BOOK 


CHAPTER  II. 
LIFE  INSURANCE  EXPLAINED  BY  DIAGRAMS. 

IN  this  chapter  we  propose  to  give  a  few  plain  arid 
simple  illustrations  of  the  science  of  life  insurance,  and 
the  practical  advantages  and  peculiarities  of  different 
kinds  of  policies. 

Insurance  for  One  Year. 

The  fundamental. idea  of  an  insurance  premium  may 
be  illustrated  by  a  triangle:  the  perpendicular  line  A  B 
representing  the  premium  just  paid,  and  the  horizontal 
one,  AC,  the  year,  divided  into  twelve  equal  spaces 
denoting  months  in  which  the  insurance  is  in  force. 


FIG.  I 


During  every  month  and  day  after  the  first  premium  is 
paid,  the  company  agrees  to  pay  the  amount  expressed 
in  the  policy  should  a  total  loss  occur.  During  this  time 
it  is  earning  the  premium  by  carrying  the  risk,  and  at  the 
end  of  the  year,  when  the  whole  is  earned,  the  entire 
premium  is  the  property  of  the  company.  If  no  loss 
occurs  on  the  policy  during  the  first  three  months,  the 
company  has  earned  one  quarter  of  the  premium,  and 
the  unearned  part  of  the  premium  may  be  separated  by 
the  second  perpendicular  line  from  the  left,  which  is 
only  three  quarters  as  long  as  the  first  line,  A  B.  If 
the  premium  is  $100  a  year,  the  cost  of  carrying  the 
risk  is  between  27  and  28  cents  a  day.  At  the  end  of 


FOR  LIFE  AGENTS. 


21 


three  months  the  company  has  earned  $25,  and  the  un- 
earned part  of  the  premium  is  $75,  as  shown  by  the 
second  perpendicular  line.  At  the  end  of  six  months 
the  company  has  earned  $50,  and  at  the  end  of  the 
year  the  whole  $100,  and  the  unearned  part  of  the  pre- 
mium is  reduced  to  nothing.  The  company  has  now 
fulfilled  its  contract. 

In  fire  insurance  the  company  sometimes  cancels  the 
risk  and  returns  the  unearned  premium.  At  the  end  of 
three  months  the  balance  due  the  policy-holder  would 
be  $75,  at  the  end  of  six  months  $50,  and  so  on.  This 
unearned  premium,  whether  in  fire,  life,  marine  or  ac- 
cident insurance,  is  the  reserve  on  liability,  and  is 
what  the  company,  in  equity,  owes  to  the  policy-holder 
at  any  given  time  before  a  loss  takes  place  on  the  pol- 
icy. 

The  policy-holder,  on  paying  his  premium,  hires  the 
company  to  stand  ready  to  pay  the  amount  insured 
should  a  loss  take  place  during  the  period  of 'insurance ; 
and  the  shorter  the  unexpired  time  the  policy  has  to 
run,  the  less  chance  there  is  of  its  being  called  upon  to 
pay  it.  This  is  the  fundamental  idea  of  all  kinds  of 
insurance.  Let  us  see  how  it  is  modified  in  a  life 
policy  : 

Increasing  Risks. 

Here  the  danger  of  dying  is  increased  each  successive 
year  after  the  assured  has  arrived  at  early  manhood. 


FIG. II 


At  any  age,  if  .the  policy  should  be  issued  for  only  one 
year,  its  conditions  would  be  governed  by  the  foregoing 
principles  ;  but  if,  having  arrived  at  an  age  when  the 
risk  gradually  increases,  he  should  take  out  a  new  poli- 
cy from  year  to  year,  the  premiums  on  the  same  amount 
would  have  to  be  annually  increased  to  correspond  with 


22  INSTRUCTION  BOOK 

the  risk.  If  the  premium  is  $100  this  year  it  may  be 
$102  next,  and  then  the  unearned  premium  at  the  end 
of  six  months  would  be  $51,  and  $25.50  at  the  end  of 
nine  months.  If  the  premium  the  next  year  is  $104, 
the  unearned  premium  at  the  end  of  six  months  is  $52, 
and  $25  at  the  end  of  nine  months. 

Since  a  larger  premium  must  be  paid  each  successive 
year  to  provide  for  increased  risk,  the  corresponding 
perpendicular  lines  gradually  increase  in  length  toward 
the  right. 

Term  Insurance. 

The  method  of  finding  the  uniform  annual  premium 
for  a  term  policy  of  three  years  is  illustrated  as  follows: 
Suppose  we  have  a  class  10,000  persons  of  the  same  age, 
and  that  during  one  year  100  die  ;  there  are  9,100  re- 
maining. During  the  second  year  101  die  and  9,799 
remain.  During  the  third  year  102  die.  The  first  year 
there  would  be  10,000  premiums  paid,  the  second  9,900, 
the  third  9,799.  Total,  29,699,  to  303  deaths.  If  each 
person  were  insured  for  $10,000,  the  total  loss  would 
be  $3,030,000,  and  the  amount  of  each  premium  re- 
quired would  be  $3,030,000  4-  29,699  =  $102  nearly. 
The  policy-holder  pays  the  annual  premium  of  $102, 
but  the  cost  of  insuring  during  the  first  year  according 
to  the  diagram  is  only  $100  ;  hence  there  is  a  balance 
or  reserve  at  the  end  of  the  first  year  of  $2,  and  is  the 
unearned  part  of  the  first  premium.  The  second"  year 
the  insured  pays  the  annual  premium  of  $102,  which, 
added  to  the  reserve  of  $2,  makes  $104  ;  but  the  com- 
pany spends  only  $102,  leaving  again  $2  reserve.  The 
third  year  the  annual  premium  of  $102  is  added  to  the 
reserve,  making  $104  ;  but  this  year  the  policy-holder 
must  pay  $104  to  meet  the  increased  death-rates,  and 
at  the  end  of  the  year  there  is  an  exact  balance. 

"Whole-Life  Insurance. 

Should  the  insured  allow  his  policy  to  lapse  at  the 
end  of  the  first  or  second  year  he  would  lose  the  reserve 
of  $2.  Now  a  whole-life  policy  with  equal  annual  pay- 
ments is  merely  a  term  policy  ending  at  the  age  of  96, 
according  to  the  American  Experience  Table  of  Mortal- 
ity, and  if  the  insured  should  continue  to  pay  an  in- 
creasing premium,  each  year  on  the  same  amount  of  in- 
surance, the  line  A  B  in  the  last  diagram  would  become 
the  curved  line  A  B  in  the  following  figure. 

The  increase  of  risk  is  not  uniform,  but  annually  in- 


FOE  LIFE  AGENTS.  23 

creases  as  the  insurance  grows  older,  so  that  while  at 
age  41  the  risk  is  almost  one  per  cent,  of  the  amount 
insured,  at  70  it  is  about  ten  per  cent.,  and  at  80  about 
fourteen  per  cent.  In  the  term  insurance  example, 
given  above,  we  saw  that  it  was  necessary  to  charge  a 

B 


FIG.  Ill 


I  1  I  I  I  I          I 

40  50  60  70  80  90      96 

higher  premium  than  was  required  at  first,  to  provide 
for  carrying  the  risk  in  the  older  ages,  and  this  rule 
must  apply  with  still  greater  force  to  a  whole-life  poli- 
cy with  equal  annual  payments,  as  the  above  figures 
will  show — the  dotted  line  denoting  the  equal  an- 
nual payments  as  compared  with  the  increasing  pay- 
ments represented  by  the  curved  line.*  In  whole-life 
insurance  this  larger  premium  is  required  to  provide 
for  a  fund  or  reserve,  which,  with  the  annual  interest 
thereon,  will  meet  the  ultimate  payment  of  the  risk 
when  the  insured  reaches  the  age  of  96,  or  if  he  dies 
before,  it  will  be  added  to  the  contributions  of  other 
policy-holders  to  pay  his  own  claim. 

In  these  explanations  we  have  not  thought  it  neces- 
sary to  show  the  effect  of  interest  or  discount  in  com- 
puting premiums  or  reserves.  The  only  effect  of  this 
element  is  to  make  them  considerably  smaller,  and  for 
the  sake  of  brevity  and  simplicity  we  omit  it. 

*  Owing  to  the  limited  space,  the  proportion  of  these  figures  is 
necessarily  somewhat  inaccurate,  but  it  is  exact  enough  for  pur- 
poses of  illustration. 


24: 


INSTRUCTION  BOOK 


Single  Payment  Life. 

In  a  single  payment  life  policy  the  premium  must  be 
large  enough  so  that  the  compound  interest  on  it  will 
enable  it  to  make  its  due  share  of  contributions  to  death 
losses  of  similar  policy-holders  of  the  same  age,  and 
still  add  enough  to  the  original  premium  so  that  at  age 
96  the  premium  will  amount  to  the  policy.  Take  the 
case  of  a  man  40  years  of  age  :  his  single  premium  for 
$1,000  (American  Experience  4J-  per  cent.)  is  $330.95. 
Adding  interest  at  44  per  cent,  $14.89,  we  have  $345.- 
•84  ;  deducting  contributions  to  other  death  claims, 
$6.47,  there  remains  $339.47 — the  single  premium  for 
age  41.  The  practical  disadvantage  of  this  kind  of  pol- 
icy is  that  a  comparatively  small  amount  of  insurance 
is  secured  .by  paying  a  large  sum  of  money  ;  for  the 
policy-holder  pays  the  present  value  of  all  the  future 
death-claims  in  advance,  and  this  is  just  equal  to  the 
present  value  of  the  future  net  annual  premiums.  To 
show  how  unprofitable,  compared  with  other  methods, 
single  premium  insurance  is,  the  following  diagram  is 
given. 


All  the  insurance  obtained  on  a  single  premium  life 
policy  is  represented  by  the  space  above  the  upper 
curved  line,  and  the  amount  of  the  annual  premium  by 
the  space  above  the  lower  curved  line.  The  expensive- 
ness  of  a  single  premium  life  policy  may  be  still  further 
illustrated  by  the  fact  that  $330.95  at  compound  inter- 
est 4J  per  cent,  in  25  years  will  amount  to  $1,000,  and 


FOR  LIFE  AGENTS.  23 

at  7  per  cent,  will  equal  this  in  16  years.  At  age  40 
the  expectation  of  life  is  about  28  years,  or  at  age  68  ; 
and  $330.95  at  compound  interest,  4£  percent.,  amounts 
at  age  68  to  $1,135.06,  and  at  7  per  cent,  to  $2,100.42. 
Unless  the  applicant  is  in  very  bad  health,  this  is  not  a 
profitable  kind  of  policy  for  him.  Reversionary  insur- 
ances from  dividends  are  small  policies  of  this  class. 

Limited-Payment  Life. 

A  life  policy  with  a  limited  number  of  premiums  is 
better  than  a  single-premium  one,  but  unless  the  pre- 
miums cease  at  70  or  75  it  has  little  advantage  over  a 
whole-life  equal  annual  premium  policy.  At  the  age 
when  the  premiums  cease  to  be  paid,  it  becomes  a 
paid-up  policy,  and  its  reserve  is  equal  to  the  single 
premium.  Thus  a  ten-annual  life  policy  issued  at  age 
30  requires  an  annual  premium  just  about  one  tenth  of 
the  single  premium  at  age  40,  for  the  premium  must  be 
large  enough  to  amount  to  this  single  premium  in  ten 
years.  The  disadvantage  of  the  ten-annual  life  policy 
is  that  the  premiums  are  too  large  in  the  younger  years 
for  profit,  and  the  less  the  number  of  premiums  the 
more  the  policy  resembles  a  single-premium  one,  and 
the  greater  the  number  the  more  it  approaches  to  ordi- 
nary life  insurance.  But  there  can  be  little  or  no  dis- 
advantage so  far  as  the  amount  of  insurance  obtained 
is  concerned,  in  taking  a  limited  payment  life  policy, 
the  premiums  to  cease  at  age  70  or  75. 

The  ten-annual  life  premium  is  represented  by  the 
short  curved  line  near  the  left  of  the  last  diagram.  At 
age  40  it  is  merged  into  the  single-premium  line. 

Amount  at  Risk. 

In  the  foregoing  example  of  term  insurance  (Fig.  II. ) 
we  saw  that  the  reserve  at  the  end  of  the  first  and  sec- 
ond year  was  $2,  and  at  the  end  of  the  third  year  no- 
thing. If  the  sum  insured  was  $10,000,  at  the  end  of 
the  first  and  second  years  the  policy-holder  would  have 
a  credit  of  $2,  and  the  amount  at  risk  which  the  com- 
pany actually  carried  during  these  years  was  $9,998. 
As  we  regard  the  reserve  at  the  end  of  the  year  only 
for  the  sake  of  simplicity,  the  reserve  on  a  three-year 
term  insurance  may  be  illustrated  by  the  space  below 
the  curved  line,  (Fig.  V.,)  and  the  annual  insurance 
done  by  the  company  by  the  space  above  it  within  the 
figure.  The  insurance  done  by  the  company  is  the 
benefit  which  the  insured  receives  from  his  premiums ; 


26 


INSTRUCTION  BOOK 


the  rest  is  the  unearned  premiums  ;  and  as  far  as  any 
benefit  is  conferred  upon  the  insured  at  the  end  of  each 
year,  this  amount  might  as  well  be  in  his  pocket  ;  but 
because  he  chooses  to  pay  a  level  instead  of  an  increas- 
ing premium,  this  amount  must  be  reserved  by  the 
company.  It  is  evident  that  the  smaller  the  sum,  the 


FIG.   V 


greater  is  the  immediate  advantage  the  policy-holder 
obtains  for  his  money  ;  that  is,  the  less  insurance  he 
does  for  himself,  the  more  the  company  does  for  him. 

Simple  Endowment  Insurance. 

Endowment  insurance  policies  are  illustrated  as  fol- 
lows :  If  a  man  should  deposit  $96  per  annum  in  a 
savings  bank  without  interest  for  ten  years,  on  the  con- 
ditions that  if  he  were  alive  at  the  end  of  that  time- 
he  should  be  entitled  to  $1,000,  and  also  if  he  died 
in  the  meantime  the  company  would  retain  the  whole 
amount  paid,  this  would  be  a  simple  endowment  (leav- 
ing out  the  item  of  interest,)  and  may  be  represented 
by  the  next  diagram. 

The  reserve  at  the  beginning  of  each  year  is  shown 
by  the  first  ten  perpendicular  lines,  and  the  last  de- 
notes the  sum  payable  in  ten  years.  In  this  illustra- 
tion there  is  no  insurance  done  by  the  company.  The 
policy-holder  pays  $960  in  ten  years,  and  if  living  at 
that  time  is  entitled  to  $1,000  ;  the  balance,  $40,  is  the 
amount  the  company  pays  to  the  policy-holder  for  in- 
suring himself  in  favor  of  it  ;  that  is,  the  policy-holder 
deposits  his  money  with  the  company  and  carries  his 
own  entire  risk  of  losing  it  for  $40.  In  this  case  the 
business  of  life  insurance  is  entirely  reversed . 


FOR  LIFE  AGENTS. 


27 


Endowment  Insurance. 

But  suppose  the  insured  wishes  to  " hedge"  his  con- 
tract, and  takes  out  a  ten-year  term  insurance  policy  in 
addition,  entitling  him  to  the  full  amount  of  $1,000 


12        34        567 


should  he  die  in  the  meantime,  the  reserve  on  this  pol- 
icy would  be  represented  by  the  curved  line  at  the  bot- 
tom of  the  diagram.  But  a  large  part  of  the  insurance 
he  would  get  under  a  single-term  policy  is  already 
earned  by  the  money  he  has  deposited  with  the  com- 
pany. Adding  these  two  reserves  together,  we  have 
the  upper  dotted  curved  line,  and  adding  the  net  pre- 
miums on  the  two  policies  we  have  the  elongated  per- 
pendicular hues.  These  two  policies,  the  term  and 
simple  endowment  combined,  constitute  an  endowment 
policy  of  insurance. 

It  is  plain  that  this  kind  of  policy  is  not  the  most 
profitable  one  for  the  policy-holder  for  the  following 
reasons  :  He  gets  a  small  amount  of  insurance  for  the 
money  paid,  a  large  part  of  his  premiums  is  locked  up 
in  his  own  deposits,  and  he  has  to  pay  more  than  his 
share  of  the  expenses  of  the  company  in  the  ratio  of  the 
benefits  received. 

The  following  diagram  represents  the  practical  work- 
ing of  a  ten-year  endowment  policy,  age  30.  The  first 
year's  reserve  is  shown  by  the  quadrilateral  over  the 
figure  1,  the  second  by  a  larger  one  over  2,  and  so  on. 
If  this  is  a  policy  of  $1,000,  the  average  amount  of  in- 
surance carried  by  the  company  (Ani.  Ex.  4£  per  cent, 
interest)  is  only  $562  per  annum — a  little  more  than 


28 


INS TR UGTION  BOOK 


one  half  the  amount  of  the  policy.  The  line  A  B  is  the 
net  premium  or  reserve  at  the  beginning  of  the  first 
year,  C  D  is  the  reserve  at  the  end  of  the  first  year. 
The  net  premium  DE  being  added,  we  have  CE,  the 
reserve  at  the  beginning  of  the  second  yaar,  and  G  F 
is  the  reserve  at  the  end  of  the  year,  etc. 


1.000 


800 


600 


400 


Fic,VlI 


200 


123456789       10 

After  the  first  year  the  lines  EG,  HI,  etc.,  are  not 
parallel  to  the  bottom  line,  but  incline  upward,  which 
shows  that  the  interest  on  the  reserves  more  than  equal 
the  cost  of  carrying  the  risk  ;  that  is,  all  the  actual  in- 
surance done  by  the  company  is  paid  for  not  by  the 
annual  premiums  but  by  the  interest  on  the  money  de- 
posited to  pay  the  final  claim. 

But  a  long  term  endowment  nearly  resembles  a  whole 
life  policy,  (which  is  only  an  endowment  or  term  insur- 
ance policy  payable,  according  to  the  American  Expe- 
rience Tables,  at  96.)  If  there  is  anything  to  choose  be- 
tween a  whole  life  policy  and  an  endowment  policy  ma- 
turing at  70  or  75,  the  advantage  is  rather  in  favor  of 
the  latter.  The  endowment  premium  is  somewhat  larg- 
er, to  offset  the  contingency  of  having  to  pay  premi- 
ums after  this  age,  or  to  pay  the  claim  at  this  period. 

Practical  Suggestions. 

Every  one  solicited  to  insure  his  life  should  ask  him- 
self the  following  questions  :  How  much  insurance  do 


FOR  LIFE  AGENTS.  29 

I  get  for  the  premiums  paid,  and  how  much  do  I 
insure  myself?  Will  the  advantages  resulting  from 
paying  large  premiums  be  sufficient  to  justify  the  in- 
creased expense  ?  Is  it  worth  while  for  me  while  young 
or  in  middle  life  to  make  a  contract  for  insuring  my  life 
between  the  ages  70  or  75  and  96  ?  Since  the  working 
expenses  are  now  assessed  upon  the  gross  premiums 
paid,  will  the  advantages  to  be  derived  from  these  ex- 
pensive methods  be  sufficient  to  justify  the  payment  of 
a  high  premium  rate  ? 


30  IN8TR  UCTION  SO  OK 


CHAPTER  III. 

THE  APPLICATION  AND  POLICY. 
The  Application. 

THE  application  is  a  proposal,  in  which  the  party 
seeking  insurance  asks  for  a  policy  upon  his  life.  As  it 
is  the  basis  of  the  contract  of  insurance  between  him 
and  the  company,  the  interests  of  both  require  that  all 
the  questions  in  it  should  be  truthfully  and  explicitly 
answered.  In  it  he  gives  a  full  description  of  himself 
sufficient  for  identification.  His  name  should  be  writ- 
ten in  full,  without  any  abbreviations  or  initials,  and 
the  same  rule  should  be  observed  with  regard  to  the 
names  of  those  for  whose  benefit  the  policy  is  made. 
The  amount  and  kind  of  insurance  should  be  explicitly 
stated,  and  also,  in  mutual  companies,  the  method  in 
which  the  surplus  is  to  be  disposed  of  when  declared. 
The  age  of  the  party  should  be  exactly  ascertained,  and 
the  correct  date  of  birth  should  be  given  in  all  cases 
where  it  can  be  procured,  since  the  premium  is  always 
taken  for  the  age  at  the  nearest  birthday.  If  required, 
the  ages  of  his  parents,  grandparents,  brothers  and  sis- 
ters, and  the  ages  at  which  any  of  them  died,  should 
also  be  given  with  all  possible  accuracy,  and  also  the 
diseases  of  which  any  of  them  may  have  died.  The 
agent  should  also  notice  the  present  condition  of  his 
health,  and  all  circumstances  connected  with  his  family 
history  which  it  may  be  important  for  the  company  to 
know.  If  any  of  his  relations  have  died  insane  or  by 
consumption,  it  is  important  that  the  company  should 
know  it,  however  unfavorable  the  facts  may  be  to  the 
prospect  of  his  being  accepted. 

The  occupation  should  be  correctly  and  definitely 
stated.  It  is  not  sufficient  to  say  that  a  man  is  a  labor- 
er ;  he  may  be  employed  in  a  powder-mill  or  nitrogly- 
cerine factory.  The  agent  should  be  careful  to  explain 
that  the  application  is  a  part  of  the  contract  of  insur- 
ance, and  that  the  policy  is  binding  only  in  case  the 
questions  in  the  application  are  answered  truthfully. 

The  application  should  be  duly  signed  and  witnessed 
according  to  the  printed  instructions  of  the  company, 


FOR  LIFE  AGENTS.  31 

and  great  care  should  be  taken  to  have  this  part  of  it 
exactly  correct.  If  a  witness  is  required,  a  suitable  one 
should  be  procured.  When  the  party  insures  for  the 
benefit  of  any  other  person  than  his  wife  or  child,  the 
agent  should  see  that  this  person  has  an  insurable  in- 
terest, *  otherwise  the  policy  will  be  null  and  void. 

When  the  application  is  finished,  duly  signed  and 
witnessed,  the  medical  examiner  makes  a  careful  exam- 
ination of  the  applicant's  physique,  and  answers  in 
writing  a  list  of  questions  on  another  page  of  the  appli- 
cation, and  then  he  returns  it  to  the  agent  or  sends  it 
direct  to  the  company.  As  the  application  is  usually 
the  only  means  whereby  the  company  can  judge  wheth- 
er the  risk  is  a  good  one  or  not,  both  the  agent  and 
medical  examiner  should  have  all  the  questions  an- 
swered definitely  and  completely.  In  an  application 
there  are  usually  some  forty  or  fifty  different  questions 
to  be  answered,  and  upward  of  two  hundred  and  fifty 
items  to  be  noted.  Every  one  of  these  should  be 
carefully  read  by  the  agent,  the  applicant,  and  the 
medical  examiner.  It  will  not  suffice  to  pass  any  of 
these  over  in  neglect,  because  in  a  list  of  ten  thousand 
applications  all  of  these  items  will  in  some  way  or  other 
be  deemed  worthy  of  special  consideration,  and  the 
officers  of  a  company  will  not  fail  to  remark  any  negli- 
gence on  the  part  of  an  agent  in  filling  out  the  applica- 
tion. It  is  also  very  disagreeable  for  an  agent, 'just  at 
the  time  he  expects  a  policy  from  the  company,  to  re- 
ceive a  returned  application,  and  a  note  requesting 
some  question  answered  more  fully  or  some  blank  filled 
up.  It  gets  the  agent  into  bad  repute,  it  puts  the  com- 
pany to  a  great  deal  of  additional  labor,  and  it  disgusts 
the  applicant  to  be  called  on  a  second  time  for  inform- 
ation. 

Some  companies  require  the  family  physician  to  an- 
swer additional  questions  respecting  the  habits  and 
health  of  the  applicant,  and  if  the  amount  to  be  insured 
is  very  large,  two  separate  examinations  are  required. 
Questions  are  sometimes  given  to  be  answered  by  an 
' '  intimate  friend  "  of  the  applicant,  but  in  many  cases 
they  are  simply  added  to  enable  the  agent  to  get  an  in- 
troduction to  other  parties  who  may  need  insurance, 
by  showing  them  the  application  and  obtaining  their 
indorsement  on  it. 

*  That  is,  will  the  party  in  whose  benefit  the  policy  is  made, 
suffer  a  pecuniary  loss  by  the  death  of  the  insured  -the  loss  being 
equal  to  or  in  some  way  commensurate  with  the  amount  of  the 
'  policy  ?  For  further  explanation  of  "  insurable  interest,"  see  the 
last  chapter. 


32  INSTRUCTION  SO  OK 


The  Policy. 

The  application  and  policy  form  the  entire  contract 
of  insurance.  The  policy  commences  by  making  the 
representations  in  the  application  its  basis,  and  the 
payment  of  the  first  premium  to  the  company  or  to  an 
authorized  agent  is  a  binding  condition  that  the  policy 
shall  be  in  force.  Then  follows  the  declaration  that 
the  company  insures  the  life  of  the  applicant  upon  a 
certain  plan  and  upon  a  given  premium,  and  this  poli- 
cy is  to  remain  in  force  provided  he  does  not  unneces- 
sarily expose  his  life  by  certain  acts  which  will  render 
the  policy  null  and  void.  These  restrictions  usually 
relate  to  travel  and  residence  in  foreign  countries,  or 
unhealthy  localities,  or  engaging  in  extra- hazardous  oc- 
cupations whereby  life  is  apt  to  be  shortened;  or  if  the 
insured  should  die  by  suicide,  the  hand  of  justice,  from 
gross  intemperance,  or  a  duel,  then  the  sum  insured  iu 
the  policy  shall  not  be  paid,  and  all  the  premiums  shall 
be  forfeited  to  the  company.  Hardly  any  two  compa- 
nies agree  upon  all  of  these  conditions  and  premises. 
In  some  companies,  which  profess  to  be  "extremely 
liberal,"  and  thereby  hold  out  additional  inducements 
to  parties  to  insure,  these  restrictions  are  almost  wholly 
removed,  but  others  more  "conservative"  adhere  to 
the  ancient  landmarks. 

When  the  policy  is  delivered  and  the  premium  paid, 
then  it  is  binding  upon  the  company.  If  the  policy  is 
delivered  before  the  first  premium  is  paid,  and  the  in- 
sured should  die  in  the  meantime,  the  courts  would 
probably  hold  the  company  liable  for  the  sum  insured, 
even  if  the  special  instructions  to  the  agent  were  that 
no  such  delivery  should  be  made.  The  act  of  the  agent 
in  delivering  the  policy  would  probably  be  considered 
as  a  waiver  of  the  right  to  demand  the  first  premium  in 
advance,  leaving  it  optional  with  the  policy-holder 
when  it  should  be  paid.  A  proper  appreciation  of  this 
fact  will  make  an  agent  careful  how  he  trifles  with  the 
interests  of  his  company  by  the  delivery  of  a  policy 
without  the  actual  receipt  of  the  cash. 

Different  Kinds  of  Policies. 

WHOLE  LIFE. — This  is  the  oldest,  the  simplest,  the 
most  common,  and  in  many  respects  the  best  kind  of 
policy.  One  of  its  principal  advantages  is  that  it  gives 
the  greatest  amount  of  whole  life  insurance  for  the  least 
premium.  It  enables  a  man  with  a  given  sum  of  money 


FOR  LIFE  AGENTO.  33 

to  make  &  larger  provision  for  his  family  at  death,  and 
it  carries  out  the  idea  of  life  insurance  more  completely 
than  any  other  kind  of  policy.  But  because  there  is  a 
larger  ratio  of  the  premiums  spent  for  the  payment  of 
losses  and  running  expenses  than  in  any  other  kind  ex- 
cept term  insurance,  the  surrender  values  and  paid  up 
policies  on  this  class  must  necessarily  be  small.  Ano- 
ther objection  to  it  is  that  in  extreme  old  age,  when  the 
insurance  is  no  longer  needed  to  protect  one's  family 
in  case  of  death,  the  annual  premium  is  a  tax  upon  the 
policy-holder.  The  conditions  of  the  policy  are  that 
the  premiums  shall  be  paid  till  death,  and  if  this  event 
does  not  occur  till  extreme  old  age,  then  the  insured  is 
paying  for  advantages  which  he  has  already  received, 
in  obedience  to  one  fundamental  law  of  all  insurance, 
that  the  losses  must  be  paid  by  the  more  fortunate  who 
escape,  and  in  life  insurance  the  survivors  must  pay 
the  losses  of  those  who  die  early. 

LIMITED  PAYMENT  LIFE. — A  modification  of  the  whole 
life  plan  is  the  limited  payment  life,  or  a  policy  paya- 
ble at  death,  but  the  premiums  payable  only  during  a 
limited  number  of  years — usually  five,  ten,  fifteen,  or 
other  similar  period.  This  has  some  advantages  not 
found  in  the  whole  life  plan.  It  enables  a  policy-holder 
to  know  definitely  when  his  premiums  will  cease,  and 
in  taking  a  policy  he  can  choose  one  in  which  the  pre- 
miums will  cease  when  he  has  arrived  at  an  age  when 
he  has  no  longer  any  need  for  insurance,  and  when  the 
continued  payment  of  premiums  would  only  be  a  bur- 
den from  which  he  would  reap  no  immediate  ben- 
efit 

A  life  policy  with  the  premiums  ceasing  at  the  age  six- 
ty-five or  seventy  probably  combines  about  as  many 
advantages  as  any  policy  which  can  be  named.  The 
number  of  premiums  is  certain,  and  there  is  no  anx- 
iety lest  the  policy  may  become  a  tax  upon  the  ex- 
treme old  age  of  the  insured.  Whatever  is  paid  on  a 
policy  after  the  age  of  seventy  is  usually  regarded  mere- 
ly as  a  penalty  for  prolonged  life  ;  it  is  contributing  to 
the  losses  of  those  who  die  younger  without  receiving 
any  other  advantage  than  the  prospect  of  its  ultimate 
payment  ;  and  unless  men  are  perfectly  certain  that 
they  will  be  able  to  afford  it,  they  should  so  insure  that 
this  tax  upon  prolonged  life  may  be  avoided.  It  is  usu- 
ally a  privilege  in  this  class  of  policies  that  the  insured 
can  obtain  a  paid-up  policy  for  a  definite  amount,  de- 
pendent upon  the  number  of  premiums  paid.  In 
whole-life  policies  this  is  not  usually  the  case.  As  the 


34  INSTR  UCTION  SO  OK 

premiums  in  this  class  are  limited  in  numbur,  they  are 
necessarily  somewhat  larger  than  those  on  the  whole- 
life  plan. 

TERM,  OK  TEMPOBAEY  POLICIES. — This  plan  provides 
for  the  insurance  of  a  life  during  a  limited  number  of 
years,  and  if  the  insured  survives  this  pei-iod  the  policy 
expires  by  limitation,  on  the.  same  principle  that  a  fire 
insurance  policy  expires  on  a  certain  day  and  hour, 
unless  renewed.  It  is  obvious  that  the  annual  premi- 
ums must  be  less  in  this  than  in  any  other  kind,  be- 
cause there  is  no  insurance  during  an  indefinite  period 
of  old  age  to  provide  for.  It  furnishes  the  largest 
amount  of  insurance  for  the  least  amount  of  money, 
during  the  limited  period  in  which  the  policy  is  in 
force.  In  a  life  policy  the  insured  will  win  at  last  if  he 
keeps  on  betting,  or  pays  his  premiums  long  enough  ; 
but  in  term  insurance,  unless  he  dies  within  a  limited 
time,  there  is  no  payment  of  the  policy.  If  he  desires 
to  keep  insured  after  the  policy  has  expired,  he  must 
submit  to  a  new  medical  examination  and  pay  a  higher 
premium. 

In  the  Massachusetts  Keports  for  1865  we  find  the 
following  testimony  of  the  Hon.  Elizur  Wright  in  favor 
of  this  class  of  policies  terminating  at  an  advanced 
age  : 

"  The  public  still  seems  unaware  of  the  advantages 
of  temporary  insurance — especially  of  terms  sufficiently 
extended  to  cover  the  whole  of  the  active  or  productive 
period  of  life.  It  seems  to  be  very  generally  believed 
that  if  a  term  policy  should  be  outlived,  all  the  pre- 
miums paid  for  it  would  be  thrown  away.  This  seems 
to  be  the  reasoning  of  people  who  do  not  regard  their 
fire  insurance  premiums  thrown  away  when  their  houses 
have  not  been  burned.  A  man  aged  thirty  ought  to  be 
able  to  get  a  policy  of  $1,000  for  a  term  of  forty  years 
by  paying  at  least  $4  per  annum  less  than  for  his  whole 
life  ;  that  is,  the  company  could  well  afford  to  make 
that  reduction  in  consideration  of  the  limit.  Four  dol- 
lars per  annum,  accumulated  at  six  per  cent,  for  forty 
years,  will  amount  to  $619.  But  if  he  pays  it  to  the 
life  insurance  company  in  order  to  have  the  policy  ex- 
tend over  the  whole  life,  and  he  is  in  sound  health  at 
the  end  of  forty  years,  the  company  will  not  give  him 
$619  as  the  surrender  value  of  his  policy,  its  value  at 
four  per  cent,  being  only  $594.38.  But  suppose  he  has 
taken  the  long  term  policy,  investing  year  by  year  the 
$4  difference  of  premium,  and  dies  at  the  end  of  thirty- 
five  years.  Then  his  heirs  get  the  amount  of  the  policy, 


FOR  LIFE  A&ENTS.  35 

$1,000,  the  same  as  if  the  policy  had  covered  the  whole 
life,  and  also  $445.72,  the  then  amount  of  the  invest- 
ment outside.  If  he  had  paid  the  whole  life  premium 
his  heirs  would  get  nothing  outside." 

As  a  general  rule  this  class  of  policies  is  not  encour- 
aged by  the  companies,  owing  to  the  greater  ratio  of 
mortality  which  is  experienced  in  persons  who  choose 
this  plan  of  insurance,  and  some  companies  utterly  re- 
fuse to  issue  term  insurance  policies,  which  clearly 
proves  that  in  some  cases  they  are  the  most  profitable 
ones  to  the  insured. 

SIMPLE  ENDOWMENT. — A  policy  of  this  class  is  paya- 
ble to  the  holder  provided  he  survives  a  certain  num- 
ber of  years  :  otherwise  the  premiums  are  wholly  for- 
feited to  the  company.  There  is  no  insurance  in  this 
class  of  policies,  because  the  company  assumes  no  risk, 
and  the  amount  is  payable  only  in  case  the  policy-holder 
survives:  Policies  of  this  kind  are  very  little  used,  and 
ought  never  to  be  issued,  but  a  few  "  children's  endow- 
ments "  are.  The  money  spent  in  premiums  would  be 
more  profitably  invested  by  depositing  it  in  a  savings 
bank. 

ENDOWMENT  INSURANCE. — This  is  a  combination  of 
term  insurance  and  simple  endowment.  The  net  pre- 
miums of  these  two  plans,  taken  for  any  age  and  num- 
ber of  years  and  added  together,  will  make  the  net  pre- 
mium for  an  endowment  policy.  It  is  payable  as  a 
simple  endowment  at  a  certain  period  if  the  insured 
survives,  and  if  not  it  is  paid  at  death,  as  in  term  in- 
surance. The  advantage  of  this  kind  of  policy  is  that 
after  the  required  number  of  premiums  have  been  paid 
the  insured,  if  living,  will  realize  the  whole  amount  of 
his  policy.  For  this  reason  it  has  some  attractions  for 
those  who  insure  for  investment  as  well  as  for  protec- 
tion. 

For  several  years  until  recently  endowment  insurance 
was  very  popular  ;  in  some  companies  there  would  be 
thirty  or  forty  per  cent,  of  the  business  done  on  this 
plan,  but  lately  there  has  been  a  change  in  the  popular 
estimation  of  it,  and  only  a  small  per  cent,  of  the  busi- 
ness is  done  in  endowments.  One  reason  is  that  the 
premiums  are  much  higher  than  in  other  kinds,  and 
the  actual  amount  of  insurance  secured  is  much  less. 
During  the  last  year  of  the  policy  the  cost  of  insurance 
is  nothing.  The  practical  working  of  high  premiums 
is  thus  explained  by  Mr.  Elizur  Wright  : 

"  It  is  marvelous  how  little  it  is  considered  that  the 
more  you  pay  in  advance  the  more  you  insure  your- 


36  INS  TR  UCTION  B  0  OK 

self.  And  the  more  you  insure  yourself  the  more  you 
have  to  pay  beyond  your  first  share  of  the  expenses." 
Another  reason  of  their  present  unpopularity  is  that 
the  people  have  been  too  often  disappointed  in  divi- 
dends or  return  surplus  on  this  class  of  policies,  and 
as  an  investment  they  have  not  been  found  to  answer 
the  expectations  which  have  been  raised  by  a  certain 
class  of  agents. 

Short  term  endowments  will  do  for  those  who  are 
rapidly  making  money,  and  who  desire  to  invest  it  in  a 
manner  which  will  be  safe  and  give  their  heirs  no  trou- 
ble to  collect  in  case  of  their  early  death.  Long  term 
endowments,  maturing  at  the  age  of  sixty-five  or  sev- 
enty, are  well  adapted  to  persons  of  limited  means,  who 
are  desirous  of  realizing  their  policies  in  old  age,  and 
therefore  should  be  encouraged. 

Endowments  are  sometimes  issued  payable  in  a  cer- 
tain number  (as  twenty  or  thirty)  years,  and  the  pre- 
miums payable  during  a  less  time,  usually  ten  years. 
There  is  no  advantage  in  this  kind  of  policy,  except 
in  certain  cases  where  the  payment  of  premiums  would 
be  more  convenient  by  this  method.  The  premiums 
are  larger  than  in  the  regular  endowments,  and  the 
amount  of  insurance  by  the  company  is  much  less. 

ANNUITIES. — A  sum  of  money  paid  by 'a  company  at 
regular  intervals  is  called  an  Annuity.  It  is  called  a 
contingent  annuity  when  the  number  of  payments  de- 
pends upon  the  life  of  a  person  or  any  uncertain  event. 
Insurance  companies  often  sell  annuities— that  -is,  in 
consideration  of  a  sum  of  money  paid  to  the  company, 
the  latter  promises  to  pay  to  the  annuitant  a  certain  sum 
during  life.  Annuities  are  directly  the  reverse  of  in- 
surance. The  earlier  the  death  of  the  annuitant  the 
more  profitable  will  it  be  for  the  company,  and  the 
longer  he  lives  the  more  will  he  realize  from  his  invest- 
ment. Annuities,  which  are  quite  common  in  England, 
are  not  popular  in  this  country,  probably  because  their 
true  value  to  people  well  advanced  in  life  is  little  known. 
Another  reason  is  that  the  annual  income  from  certain 
classes  of  losses  will  often  realize  quite  as  much  as 
companies  are  willing  to  pay  in  an  annuity.  At  the 
age  forty,  $1,000  will  purchase  an  annuity  of  $64.36, 
according  to  the  American  Experience  Tables,  and  four 
and  a  half  per  cent,  interest,  and  at  the  age  of  fifty  it 
will  purchase  $75.55.  Because  companies  do  not  give 
any  bonus  or  return  surplus  upon  them,  money  can 
usually  be  invested  in  some  other  securities  quite  as 
profitably.  But  for  people  well  advanced  in  years, 


FOR  LIFE  AGENTS.  37 

who  have  a  sum  of  money  for  their  support,  and  no 
one  dependent  upon  them ,  the  purchase  of  an  annuity 
is  as  safe  and  satisfactory  a  method  as  they  can  choose 
to  make  a  provision  for  the  remainder  of  life.  If  an  an- 
nuitant lives  beyond  the  expected  period  of  death,  the 
income  every  year  is  a  clear  gain  to  him. 

Payment  of  Premiums  and  Days  of  Grace. 

The  premium  of  a  policy  should  bo  paid  on  or  before 
the  day  when  it  becomes  due.  Owing  to  the  tendency 
of  policies  to  lapse,  and  in  order  to  give  the  policy- 
holders  every  suitable  chance  to  keep  them  in  force, 
some  companies  have  adopted  the  practice  of  granting 
thirty  days  grace  in  the  payment  of  premiums.  When 
the  policy-holder  takes  advantage  of  this  privilege,  the 
company  should  be  careful  to  collect  the  additional  ac- 
crued interest  on  the  premiums  deferred. 

Formerly,  when  the  lapsing  of  policies  was  considered 
a  legitimate  source  of  profit,  the  companies  required 
all  premiums  to  be  paid  by  12  o'clock  M.  on  the  clay 
they  were  due,  or  the  whole  of  the  reserve  and  all  divi- 
dends or  bonus  was  forfeited  to  the  company  ;  but 
more  recently  it  is  admitted  that  there  is  often  more 
profit  in  keeping  a  policy  in  force  than  by  having  it 
lapse  after  so  much  has  been  expended  to  obtain  it. 

Semi-Animal  and  Quarterly  Premiums. 

Premiums  are  also  paid  semi-annually  and  quarterly. 
This  method  makes  considerable  extra  clerical  labor  for 
the  company,  although  it  may  in  many  instances  be 
more  convenient  to  the  policy-holder.  Semi-annual  and 
quarterly  premiums  are  more  apt  to  be  followed  by  a 
lapse  of  the  policy  than  those  which  are  paid  annually, 
and  they  occasion  two  or  four  times  as  much  office 
work.  The  usual  rule  to  find  the  semi-annual  rate  is 
to  multiply  the  annual  rate  by  1.04  and  divide  the  re- 
sult by  2  ;  and  to  find  the  quarterly  rate,  multiply  the 
annual  rate  by  1.06  and  divide  by  4.  By  this  method 
the  policy-holder  pays  sixteen  per  cent,  interest  on  the 
deferred  part  of  the  premium.  If  this  fact  were  gen- 
erally known  and  explained  to  policy-holders,  deferred 
premiums  would  not  be  as  popular  as  they  are  now. 

Changes  of  Policies. 

Policy-holders  frequently  want  their  policies  changed 
from  one  kind  to  another,  which  they  think  will  be 


38  INSTRUCTION  BOOK 

more  profitable  or  less  expensive.  In  the  general  ig- 
norance of  the  comparative  values  of  the  different  kinds, 
they  are  sometimes  imposed  upon  by  unscrupulous 
agents,  and  persuaded  to  take  a  short  term  endowment 
or  otlier  high-priced  policy,  when  something  less  costly 
would  have  answered  just  as  well.  As  a  rule  these 
changes  are  not  favored  by  the  companies,  for  they 
make  a  great  amount  of  extra  work  at  the  home  office, 
and  the  changes  must  be  noted  in  several  different 
books.  When  the  insured  wants  his  policy  changed 
he  must  first  jeturn  it  to  the  company,  and  usually  a 
new  medical  examination  is  required  at  his  expense. 
The  reason  for  requiring  a  new  medical  examination  is 
that  the  kind  of  policy  chosen  may  throw  an  increased 
burden  of  insurance  on  the  company,  which  it  did  not 
agree  to  take  when  it  issued  the  first  policy.  Thus  a 
person  may  be  insured  on  a  ten  year  endowment,  and 
suspecting  that  he  may  die  in  a  few  years  he  wishes  to 
change  it  to  the  whole  life  plan,  which  cannot  be  done 
without  additional  risk  to  the  company. 

The  new  policy  will  either  bear  a  new  premium  cor- 
responding to  the  advanced  age  of  the  insured,  or  it 
can  be  dated  back  to  the  time  of  the  first  policy,  and 
whatever  surrender  value  there  may  be  to  the  credit  of 
the  policy-holder  can  be  used  in  paying  the  new  pre- 
miums. 

If  the  policy-holder  or  agent  discovers  that  any  mis- 
takes have  been  made  in  the  application  or  policy,  no- 
tice should  be  given  to  the  office  of  the  company  imme- 
diately, that  they  may  be  corrected.  A  post-mortem 
litigation  over  a  policy  is  not  a  pleasant  thing  to  con- 
template, and  should  always  be  avoided  if  possible. 

An  agent  should  never  induce  the  insured  to  change 
his  policy  for  the  sake  of  enabling  him  to  obtain  the 
first  commissions.  This  is  unjust  to  the  policy-holder 
and  brings  the  business  into  disrepute. 


VOE  LIFE  AGENTS. 


CHAPTER  IV. 

HABITS  AND    QUALICATIONS  OP  A    GOOD 
AGENT. 

Motives  for  accepting;  an  Agency. 

BEFORE  a  man  commences  the  business  of  a  life  insur- 
ance agent,  he  should  undergo  a  careful  self-examina- 
tion, and  ask  himself  what  are  the  motives  which  influ- 
ence him.  If  he  undertakes  it  just  for  a  few  months, 
because  business  is  dull  and  he  wants  something  to  do 
till  he  can  find  some  other  employment,  then  he  is  tol- 
erably sure  to  accomplish  but  very  little.  When  once 
he  has  accepted  this  calling-it  should  be  regarded  as  a 
life  work.  If  he  sets  out  intending  to  make  money  by 
getting  business  anyhow,  consulting  neither  the  wel- 
fare of  the  company  nor  of  the  insured,  if  he  works  for 
that  company  which  pays  the  highest  commissions 
without  regard  to  its  reputation  or  antecedents,  then  he 
will  probably  find  out  before  long  that  he  has  made 
some  fatal  errors.  Having  started  with  unworthy  mo- 
tives, he  has  adopted  unworthy  methods  of  action.  It 
is  not  required  that  a  man  should  become  an  agent  for 
the  sake  of  benefiting  his  fellow  men,  and  thereby 
constitute  himself  a  home  missionary  of  life  insurance 
and  a  colporteur  of.  policies,  but  the  company  and  the 
public  do  expect  that  he  will  bring  with  him  the  same 
honor,  integrity  and  worthy  motives  which  would  lead 
him  to  enter  upon  any  other  honorable  calling,  and  by 
which  alone  he  can  attain  distinguished  success. 

Respect  for  his  Calling. 

Having  started  with  proper  motives,  the  first  qualifi- 
cation which  a  solicitor  of  insurance  should  have  is  a 
consciousness  that  his  calling  is  an  honorable  one.  A 
belief  in  this  truth  should  be  firmly  rooted  in  his  mind. 
If  other  agents  are  a  disgrace  to  the  profession,  let  him 
resolve  to  be  an  exception.  If  he  is  engaged  for  a  good 
company,  he  is  conferring  a  much  greater  favor  on  the 
applicant  by  persuading  him  to  take  a  policy  than  the 
applicant  is  upon  the  agent  by  making  him  the  means 
of  insuring  his  life.  He  should  be  fully  impressed  with 
the  belief  that  life  insurance  is  au  antidote  for  half  the 


40  INSTRUCTION  BOOK 

poverty  which  afflicts  humanity  ;  that  had  it  been  gen- 
erally practiced  by  every  able-bodied  man  during  the 
last  fifty  years,  mankind  would  have  been  more  indus- 
trious in  order  to  pay  their  premiums,  the  old  and  in- 
firm would  now  have  a  comfortable  support,  and  many 
a  child  would  have  been  assisted  to  obtain  a  good  edu- 
cation or  a  more  respectable  position  in  society,  instead 
of  having  to  struggle  on  through  ignorance,  poverty 
and  seclusion.  He  should  remember  that  life  insurance 
is  opposed  to  intemperance,  because  every  policy  is  fa- 
tally vitiated  by  death  from  drunkenness,  or  delirium 
tremens.  It  is  the  same  with  many  criminal  offenses  ; 
in  short,  a  life  insurance  policy  p%uts  a  man  under  bonds 
to  live  and  die  an  industrious,  sober  and  peaceable  citi- 
zen. Now  there  is  a  moral  element  in  the  business 
which  we  do  not  find  anywhere  else.  The  ' '  drum- 
mer," or  commercial  traveler,  who  sells  dry-goods, 
hardware  or  machinery,  knows  that  he  is  conferring  no 
such  lasting  benefit  on  the  public  as  the  life  agent. 
His  goods  may  increase  their  physical  comforts,  but 
they  will  have  no  effect  on  the  character  of  those  who 
purchase  and  use  them.  But  in  life  insurance  it  is 
different  ;  the  agent  is  selling  something  which  will 
make  a  man  love  his  family  more,  which  will  tend  to 
restrain  him  from  one  of  the  worst  of  vices,  and  will 
elevate  him  in  his  own  estimation,  and  in  the  estima- 
tion of  those  who  love  him.  And  before  leaving  this 
topic  we  quote  the  oft-repeated  words  of  Hon.  Elizur 
Wright,  an  authority  which  stands  at  the  head  of  life 
insurance  literature  in  this  country  : 

"Among  the  honorable  workers  in  the  civilized 
world,  to  whom  the  public  as  well  as  the  assured  will 
die  indebted,  we  give  faithful  and  successful  life  assur- 
ance agents  a  high  place,  and  no  field  that  we  know  of 
is  more  inviting  to  an  ambition  that  would  devote  the 
best  of  talent  to  the  benefit  of  society  at  large  and  indi- 
viduals in  particular." 

Appearance  and  Manner 

The  agent  should  be  careful  not  to  offend  by  actions 
or  manners  which  may  be  repulsive,  especially  by  too 
abrupt  a  method  of  presenting  the  subject.  His  whole 
duty  is  to  please,  to  inform  and  convince,  and  the  two 
latter  results  cannot  be  accomplished  if  the  first  is  ne- 
glected. A  great  deal  depends  upon  first  impressions, 
and  if  an  agent,  by  his  agreeable  manners  and  easy  in- 
troduction, secures  the  good  will  of  a  stranger  he  has 
called  upon,  his  chances  of  success  are  greatly  im- 


FOR  LIFE  AGENTS.  41 

proved.  Those  men  whose  winning  smile  and  silvery 
tongue  have  an  indescribable  fascination  about  them 
are  they  who  succeed  in  gaining  the  attention  and  se- 
curing a  willing  hearing. 

Tact. 

There  are  some  men  whose  personal  magnetism  is 
such  that  they  will  often  persuade  a  man  to  insure  who 
has  fully  resolved  to  have  nothing  to  do  with  it.  The 
applicant  finds  himself  in  conversation  with  one  whose 
presence  and  manner  are  agreeable  to  him,  and  the 
subject  of  insurance,  instead  of  being  annoying,  is  made 
attractive,  new  views  and  features  are  presented,  and 
finally,  without  intending  it,  he  allows  the  agent  to  fill 
out  his  application.  Such  a  quality  cannot  be  taught 
by  books  or  rules  ;  it  can  only  be  acquired  by  practice 
and  example .  If  this  agent,  previous  to  this  supposed 
interview,  had  meditated  upon  the  task  before  him,  he 
might  have  reasoned  in  this  manner  :  "I  have  an  arti- 
cle which  this  man  needs  :  it  will  make  him  happier 
and  better  through  life,  but  it  is  of  such  a  nature  that 
I  cannot  show  it  to  him  like  an  article  of  merchandise. 
It  is  a  privilege  which  he  can  acquire  in  a  certain  con- 
tingency sure  to  occur  ;  it  is  also  an  obligation  to  be 
fulfilled  by  the  company  ;  but  I  can  only  explain 
it,  and  allow  him  to  purchase  it  if  he  sees  fit.  If 
it  were  a  coat,  or  a  hat,  I  could  hold  it  up  before  him 
or  let  him  try  it  on  ;  but  now  I  must  convince  him 
that  he  needs  this  peculiar  protection  which  a  life  poli- 
cy alone  can  give.  How  shall  he  be  convinced  ?  Where 
are  his  weak  points  ?  Is  he  prejudiced  in  favor. of  or 
against  life  insurance  ?  In  what  way  shall  I  approach 
him  ?"  It  is  tact  which  enables  the  agent  to  answer 
these  questions,  to  introduce  the  subject  in  an  agreea- 
ble manner,  to  watch  the  countenance  of  the  party  and 
discover  if  possible  the  thoughts  which  are  passing  in  his 
mind  ;  to  anticipate  objections  or  parry  them  without 
seeming  to  contradict ;  at  the  same  time  to  interest  and 
instruct,  and  finally  to  secure  the  application. 

Social  Qualities. 

An  agent  should  make  friends  wherever  he  goes.  In 
all  his  intercourse  with  his  fellow-men  he  should  strive 
to  leave  a  pleasant  impression.  If  the  circumstances 
are  not  propitious  for  introducing  the  subject  of  insur- 
ance, he  should  make  his  presence  not  only  felt  but  de- 
sired again.  This  is  not  hypocrisy  or  deception  ;  it  is 


42  INSTS  UGTION  B 0  OK 

what  all  men  ought  to  practice.  In  some  other  kinds 
of  business  it  is  equally  essential.  The  salesman  is 
taught  to  be  as  polite  as  possible  to  his  customers,  and 
to  make  them  desirous  to  trade  for  the  sake  of  trading 
with  him.  But  in  advocating  the  cultivation  of  the  so- 
cial qualities,  it  is  not  meant  that  the  agent  should  get 
into  the  habit  of  treating  his  newly-made  friends  in  ev- 
ery sample  room  or  saloon.  Such  a  course  would  in 
many  instances  defeat  his  intentions  ;  but  an  easy, 
graceful  method  of  conversation,  a  general  bonhomie 
is  a  quality  w.hich  will  go  far  toward  securing  busi- 
ness. 

Cheerfulness. 

Whatever  discouragements  an  agent  may  meet  with, 
he  should  never  allow  himself  to  be  betrayed  into  de- 
spondency or  anger.  A  cheerful  disposition  is  an  es- 
sential quality  to  success.  He  should  not  get  the  idea 
that  every  man  will  insure  whom  he  solicits;  the  news- 
boys in  the  street  do  not  sell  a  paper  to  every  man  they 
ask  to  buy  one.  In  a  hundred  men  there  are  only  one 
or  two  who  will  adopt  anything  new  upon  its  merits 
without  seeing  how  it  has  succeeded  in  the  case  of  some 
one  else,  and  then  only  after  a  great  deal  of  delibera- 
tion and  explanation.  Such  men  should  not  be  de- 
spaired of  if  they  do  not  look  favorably  on  life  insur- 
ance the  first  time  it  is  presented. 

Nor  should  the  conduct  of  rival  agents  disturb  his 
equanimity.  If  they  publish  false  reports  about  the 
company  he  represents,  let  him  write  to  the  officers  and 
ask  them  how  to  counteract  them.  If  the  business  is 
dull  and  money  scarce,  the  labors  of  an  agent  should 
not  be  relaxed.  In  dull  times  the  seed  can  be  sown  in 
the  minds  of  those  who  would  willingly  insure  if  they 
had  the  means  ;  or  better  still,  it  is  the  time  above  all 
others  to  urge  insurance  as  the  only  sure  method  of 
making  provision  for  one's  family  in  case  of  death .  In 
life  insurance,  as  in  politics,  there  are  many  things 
which  must  be  forgotten.  If  one  meets  with  a  decided 
refusal  in  presenting  the  subject,  there  is  no  necessity 
for  him  to  be  angry  or  discouraged.  Had  the  agent 
been  aware  of  the  motives  which  led  the  man  to  refuse 
to  listen  in  this  supposed  case,  he  might  have  obviated 
his  objections  or  stated  some  facts  which  would  have 
produced  a  favorable  impression  on  his  mind.  It  is 
usually  ignorance  or  prejudice  which  makes  men  refuse 
to  listen  to  the  claims  of  life  insurance,  and  the  only 
Way  for  an  agent  to  do  is  to  calmly  and  perseveringly 


FOR  LIFE  AGENTS.  43 

prepare  their  minds  for  the  reception  of  the  truth.  Men 
cannot  be  driven  to  insure,  nor  can  they  be  brought 
into  the  fold  in  any  other  manner  than  in  their  own 
chosen  way. 

Good  Temper. 

Above  all  things,  an  agent  should  never  lose  his  tem- 
per. The  best  way  for  an  agent  to  disarm  a  person  who 
treats  him  in  a  repulsive  manner  is  to  have  a  witty  jest 
or  a  pleasant  story  to  tell  and  watch  the  effect.  In  such 
a  case  we  should  say  :  Get  a  man  to  laugh  with  you, 
but  do  not  laugh  at  him.  It  may  be  that  you  have  pre- 
sented the  subject  at  an  unseasonable  hour,  when  his 
attention  is  engrossed  with  other  things;  your  tact  and 
good  sense  will  show  you  whether  this  is  so  or  not.  If 
so,  leave  him  favorably  impressed  with  yourself  and 
your  cause,  with  one  or  two  facts  to  think  about,  and 
take  another  opportunity  of  iirging  the  matter  upon 
him.  There  are  some  days  and  seasons  of  the  year 
when  trout  will  not  bite,  no  matter  how  tempting  a  bait 
y.ou  may  place  before  them. 

Perseverance. 

An  agent  should  never  despair  of  accomplishing  some 
great  and  good  results  in  his  work.  A  short,  spasmo- 
dic trial  in  the  business  is  not  a  sufficient  test.  Be- 
cause soliciting  requires  some  of  the  highest  qualities 
of  a  salesman,  he  should  never  deem  any  fact  bearing 
on  the  business  too  insignificant,  and  no  act  too  trivial 
in  order  to  secure  an  application.  Many  men  are  a  long 
time  in  making  up  their  minds  to  take  a  policy.  This 
delay  may  be  caused  by  a  constitutional  slowness  of 
perception,  temporary  financial  embarrassment,  or  a 
prejudice  which  they  have  against  it.  It  takes  time  for 
some  men  to  examine  the  nature  of  the  contract  ;  the 
agreement  to  pay  a  premium  for  a  number  of  years  or 
during  life  must  be  clearly  considered.  If  one  view  of 
the  subject  does  not  produce  conviction,  another  should 
be  presented,  the  agent  in  the  meantime  endeavoring 
lo  study  his  case  and  present  the  most  effectual  argu- 
ments and  remove  those  objections  which  stand  in  his 
way.  The  same  persistency  to  be  exercised  in  regard 
to  individuals  should  be  followed  in  the  management  of 
an  agency.  The  great  companies,  whose  influence  is 
co-extensive  with  the  Union,  were  built  up  by  men  who 
made  life  insurance  the  one  great  business  of  their 


4A  IN8TE UCT10N  BOOK 

lives,  who  allowed  nothing  to  turn  them  aside  or  to  in- 
terfere with  their  ultimate  success. 

Enthusiasm. 

Another  qualificatior  which  an  agent  should  have  is 
zeal  and  enthusiasm.  By  this  we  do  not  mean  a  noisy, 
boisterous  manner,  which  repels  more  than  it  attracts, 
but  an  earnestness  which  shows  that  the  agent  is  sin- 
cere in  what  he  says.  It  is  not  sufficient  to  present  the 
subject  of  life  insurance  to  a  stranger  and  await  his  an- 
swer yes  or  no.  An  agent  should  feel  that  he  is  endeav- 
oring to  do  a  great  kindness  to  the  hearer  ;  that  life  in- 
surance is  one  of  the  most  important  subjects  which 
can  attract  his  attention,  and  an  earnest,  sincere  man- 
ner of  presenting  it  is  the  only  way  to  accomplish  great 
results.  He  should  talk  as  if  he  believed  in  it,  and  as 
if  the  future  financial  welfare  of  the  listener  depended 
on  his  taking  a  policy.  Nothing  short  of  this  will  an- 
swer. 

Notice  how  the  successful  lawyer  talks  to  the  jury  to 
win  his  case  ;  every  muscle  in  his  body  speaks — every 
word  is  instinct  with  feeling  and  argument.  Ami  those 
who  have  won  the  great  prizes  in  life  insurance  have 
been  men  who  could  sit  down  and  so  interest  the 
hearer,  so  lead  him  on  from  one  point  to  another,  pre- 
senting the  truth  in  such  a  clear  and  convincing  light, 
that  he  would  find  himself  gradually  and  impercepti- 
bly convinced  in  spite  of  all  his  previous  resolutions  to 
the  contrary.  There  have  been  and  still  are  men  in  the 
field  whose  persuasive  powers  are  so  great,  and  whose 
earnest  appeals  so  irresistible,  that  about  all  they  need 
to  secure  an  application  is  a  fair  hearing  and  a  good  op- 
portunity to  present  the  subject.  Earnestness,  then,  is 
a  trait  which  should  be  carefully  studied,  for  without  it 
the  agent  has  little  chance  of  success. 

Honesty  in  Soliciting. 

We  have  now  come  to  one  of  the  most  important  sub- 
jects in  the  whole  work,  because  one  of  the  greatest 
present  curses  of  the  business  is  the  way  in  which 
agents  misrepresent  it.  Some  agents  seem  to  think  it 
necessary  to  tell  larger  stories  about  dividends  and  sur- 
render values  than  any  other  agent,  and  to  give  the 
most  positive  assurances  that  the  company  which  they 
represent  is  far  better  in  every  respect  than  any  other. 
In  discussing  the  qualification  of  truthfulness,  we  pro- 
pose to  speak  on  the  subject  with  exceeding  plainness, 


FOR  LIFE  AGENTS.  45 

ami  not  to  leave  unsaid  anything  necessary  to  purify 
the  moral  atmosphere  of  the  agency  business. 

An  agent  should  deal  honestly  with  the  applicant.  By 
this  we  mean  that  he  should  not  allow  himself  to  re- 
commend any  plan  of  insurance  which  will  not  con- 
tinue to  be  satisfactory  to  him.  He  should  not  let  his 
greed  of  first  commissions  urge  upon  him  a  five  or  ten 
year  endowment,  with  a  costly  annual  premium,  when 
a  whole  life  policy,  or  life  policy  with  fifteen  or  twenty 
annual  payments,  would  do  just  as  well,  and  be  a  great 
deal  more  appreciated  by  the  policy-holder,  as  soon  as 
he  learned  the  difference  between  them.  A  great  part 
of  the  disgrace  into  which  life  insurance  has  fallen 
among  a  certain  class  of  men,  and  the  greatest  part  of 
the  lapsed  and  paid-up  policies,  are  traceable  to  the 
misrepresentations  made  by  agents  in  procuring  the  ap- 
plication. An  agent  should  never  tell  a  man  in  moder- 
ate circumstances  and  with  a  growing  family  that  he 
had  better  take  a  ten  year  endowment  instead  of  a 
whole  life  policy,  costing  the  same  annual  premium. 
Agents  have  been  greatly  to  blame  in  this,  and  the  con- 
sequence is  that  the  popularity  of  short-term  endow- 
ments has  justly  suffered  during  the  last  few  years.  If  a 
man  offers  to  invest  his  money  in  this  manner,  he  should 
be  informed  that  the  same  amount  of  money  in  another 
form  would  confer  a  much  greater  benefit  on  him, 
while  in  costly  short-term  premiums,  expectations  are 
raised  which  are  hardly  ever  realized.  But  the  compa- 
nies have  been  as  much  to  blame  as  the  agents,  owing 
to  the  ignorance  or  carelessness  of  the  officers  in  not 
grading  the  commissions  properly,  or  because  it  is 
made  more  lucrative  for  the  agent  to  insure  upon-  the 
high-priced  short-term  plans  than  any  other.  But 
more  information  now  prevails  in  regard  to  this  sub- 
ject. Men  are  insuring  now  for  insurance  and  not  for 
the  promised  dividends  ;  they  are  buying  insurance  as 
a  protection  to  their  families  against  want,  and  not  as 
an  investment.  They  begin  to  see  the  mistakes  they 
made  when  they  leaned  implicitly  upon  the  judgment 
of  the  agent.  In  all  cases  when  the  applicant  does  not 
express  any  preference  for  some  particular  plan  of  in- 
surance, after  finding  out  what  one  is  really  best  for 
him  in  his  present  condition,  the  agent  should  urge 
that  which  is  the  best  adapted  to  his  circumstances . 
Then  the  policy  will  not  be  so  apt  to  lapse,  the  renew- 
als will  be  more  promptly  paid,  and  the  company  will 
have  a  better  reputation  for  the  honorable  dealing  of  its 
agents.  In  all  these  matters  the  agent  is  not  working 
for  himself  alone,  but  for  the  company,  which  is  inter- 


46  INSTRUCTION  BOOK 

ested  in  having  a  class  of  business  which  will  stay  on 
the  books  till  the  claims  mature.  By  taking  a  manly, 
straightforward  course,  by  consulting  the  real  interests 
of  the  insured,  and  recommending  only  such  forms  of 
policies  as  will  be  really  satisfactory  when  clearly  un- 
derstood, the  agent  is  honoring  his  calling  and  laying  a 
foundation  for  many  future  renewals. 

Consequences  of  Misrepresentation. 

A  dissatisfied  policy-holder,  one  who  believes  that  he 
has  been  misled  by  an  agent,  is  capable  of  doing  an  im- 
mense deal  of  harm.  Perhaps  he  rushes  into  print, 
showing  how  the  agent  promised  one  thing  and  the 
company  performed  another  ;  how  he  does  not  get  the 
expected  dividends  ;  how  the  company  will  not  give 
him  any  surrender  values  ;  and  all  the  neighborhood  is 
excited  about  the  swindle  of  life  insurance.  If  the 
company  does  not  fulfill  all  the  promises  which  the 
agent  made  when  soliciting,  he  is  very  apt  to  hear  of 
it  when  he  collects  the  renewals.  Other  policy-holders 
will. listen  to  his  statement,  and  the  policies  will  gradu- 
ally, drop  off  and  few  if  any  be  added. 

It  is  a  lamentable  fact  that  the  policies,  as  a  class, 
taken  during  the  past  few  years,  are  short-lived  ;  in  the 
best  companies  only  seven  or  eight  years  is  estimated 
the  average,  while  in  France  the  average  age  of  a  poli- 
cy is  upwards  of  twenty  years,  or  about  three  times  as 
great  as  ours.  And  this  is  mostly  owing  to  the  dissat- 
isfaction of  the  public  and  the  misrepresentations  which 
agents  have  made  about  future  dividends,  surrender 
values,  liberality  of  the  company,  etc.  Life  insurance 
in  this  country  has  not  been  overdone,  but  it  has  been 
badly  done,  and  a  thorough  reform  is  imperatively  de- 
manded. 

But  the  fault  is  not  wholly  on  the  part  of  the  agents; 
the  officers  of  many  companies  are  equally  to  blame  for 
furnishing  the  means  and  the  opportunity  of  misrepre- 
sentation. They  supply  agents  with  printed  documents 
giving  wonderful  hypothetical  statements  which  may 
be  realized  under  certain  conditions ;  they  cause  ' '  great 
expectations  "  and  give  infinitesimal  results.  The  agent 
is  taught  that  his  business  is  merely  to  get  applications 
and  to  forward  the  premium,  no  matter  what  state- 
ments have  been  made  to  procure  them.  No  attempt 
is  made  by  such  companies  to  elevate  or  purify  the  bu- 
siness. If  the  agent  succeeds  in  bringing  in  a  sufficient 
number  of  applications,  he  is  honored  with  a  front 
seat,  if  not,  he  is  of  no  importance. 


FOR  LIFE-  AGENTS.  47 


Some  Companies  insist  upon  the  Truth  in  Solicit- 
ing. 

But  in  contrast  to  this  there  are  some  companies 
which  take  a  noble  stand  against  all  kinds  of  misrepre- 
sentation and  deception  in  soliciting.  They  are  not  so 
numerous  as  they  should  be,  but  we  hope  their  number 
is  annually  increasing.  Such  companies  will  be  the 
most  prosperous  when  once  the  people  learn  that  they 
are  never  deceived  or  disappointed  by  their  agents. 
When  Mr.  A .  T.  Stewart  was  once  asked  what  was  the 
greatest  difficulty  he  had  to  overcome  in  his  business, 
he  replied,  it  was  to  make  his  clerks  speak  the  truth. 
In  his  immense  palatial  stores,  the  largest  on  the  conti- 
nent, no  misrepresentation  of  the  quality  of  goods  is 
allowed.  The  same  rule  should  be  insisted  upon  in  so- 
liciting life  insurance  ;  the  standard  of  veracity  should 
be  placed  high,  and  then  the  business  will  be  more 
honorable  and  more  profitable.  The  following  extract 
from  a  letter  of  the  secretary  of  a  life  insurance  com- 
pany to  an  agent,  expresses  our  opinion  so  fully  that 
we  deem  it  worthy  of  a  place  here. 

"  With  a  full  knowledge  of  the  fact  that  there  are  in 
the  field  of  life  insurance  a  few  men  who  belie  the  be- 
nevolent nature  of  the  institution,  and  give  evidence  of 
a  want  of  that  high  honor  that  bears  a  man  above  the 
tricks  of  charlatans,  and  of  that  strict  veracity  which 
will  sacrifice  gain  to  truth,  the  officers  of  this  company 
have  from  the  first  set  their  faces  against  the  employ- 
ment of  any  such  men,  on  any  terms  whatever.  They 
will  have  nothing  to  do  with  falsehood  or  deception  in 
any  form  or  any  degree.  They  do  not  believe  that  they 
are  necessary  to  the  success  of  the  business  ;  on  the 
contrary,  they  are  fully  persuaded  that  they  are  an  in- 
jury and  a  disgrace.  They  cannot  therefore  tolerate  for 
a  moment  the  idea  that  one  of  the  company's  agents  shall 
use  such  means  for  success.  The  company  seeks  and  de- 
sires men  as  agents  who  not  only  witt  not,  but  who  can- 
not get  their  own  consent  to  resort  to  falsehood  or  de- 
ception in  order  to  succeed  in  any  case.  The  company 
wants  truthful  men,  men  who  cannot  stoop  to  a  mean 
act  for  the  sake  of  gain  ;  who  esteem  honor  and  truth 
as  rubies  above  all  price.  Such  men  give  character  not 
only  to  the  institution,  but  to  the  company  they  repre- 
sent, and  redeem  life  insurance  from  the  obloquy  which 
a  few  men  here  and  there  have  thrown  upon  it  by  false 
representations.  The  institution  is  all  that  it  claims  to 
be,  and  truth  and  probity  will  build  it  up  more  rapidly 
than  falsehood  and  deception." 


48  INSTS UGTION  BOOK 

Character  of  an  Agent. 

In  addition  to  what  has  been  snid  is  it  necessary  to 
discuss  the  importance  of  an  unblemished  reputation 
for  veracity  and  honesty  in  an  agent  ?  In  some  kinds 
of  business  a  man's  reputation  is  his  stock  in  trade  ; 
there  are  manufacturing  establishments  whose  trade- 
mark is  worth  a  fortune  ;  when  people  buy  their  goods 
they  know  that  no  deception  is  used  in  trying  to  sell 
fhem  as  anything  different  from  what  they  really  are. 
There  are  some  lawyers  whose  advice  would  be  cheap 
at  one  thousand  dollars,  while  that  of  others  would  be 
dear  at  ten.  Why  this  difference  ?  Because  in  the  one 
•case  a  man  has  spent  years  in  building  up  a  reputation 
which  will  last  his  lifetime.  Men  believe  what  he  says, 
and  they  know  he  would  not  make  any  incorrect  state- 
ment. It  should  be  so  in  life  insurance  ;  every  agent 
should  strive  to  have  such  a  reputation  for  veracity  and 
honor,  and  be  so  well  known  in  the  community  where 
he  is  at  work,  that  his  word  would  never  be  questioned. 
And  if  every  agent  would  make  this  his  aim,  and  if  com- 
panies would  take  special  pains  to  see  that  their  agents 
made  no  misrepresentations,  we  should  have  far  less 
dissatisfaction  with  the  companies  than  at  present,  and 
one  of  the  most  troublesome  features  in  the  business 
would  be  removed.  An  agent  passing  a  few  weeks  in  a 
town,  and  talking  with  hundreds  of  people,  soon  be- 
comes a  marked  man;  people  remember  his  statements 
and  talk  of  them  to  each  other,  and  if  he  insures  a 
number  of  people,  they  remember  him  as  long  as  their 
policies  are  in  force.  If  he  has  secured  their  applica- 
tions by  some  exaggerated  statements  about  dividends 
or  profits,  or  told  some  preposterous  story  about  the 
advantages  of  his  company,  they  will  talk  of  it  to  oth- 
ers, and  neither  himself  nor  his.  company  can  do  any 
business  there  afterward.  And  this  is  the  more  palpa- 
ble because  people  feel  more  sensibly  when  they  are 
duped  by  a  life  insurance  agent  than  by  almost  any 
other  person  If  a  man  buys  a  horse  he  seea  the  ani- 
mal; he  takes  the  reins  and  drives  him,  and  in  his  pur- 
chase relies  upon  his  own  judgment  ;  but  the  contract 
of  life  insurance  is  one  which  he  seldom  or  never  sees 
till  he  has  paid  for  it,  and  he  cannot  tell  whether  the 
agent  has  misled  him  or  not  for  several  years  afterward; 
he  does  not  see  the  company  or  know  anything  of  its 
affairs  ;  he  takes  everything  on  the  word  of  the  agent, 
and  if  he  is  disappointed,  he  lays  the  whole  blame  upon 
the  company.  The  company  may  never  have  given  the 
agent  any  authority  to  make  these  statements  ;  that 


49 


makes  little  difference  as  long  as  he  has  procured  ap- 
plications by  deceptive  methods.  The  reputation  of 
the  whole  company  and  that  of  every  other  agent  suf- 
fers by  the  conduct  of  one  who  is  unable  or  unwilling 
to  maintain  a  rigid  adherence  to  the  truth.  If  an 
agent,  in  returning  to  a  place,  finds  those  whom  he  for- 
merly insured  are  satisfied  with  his  company,  he  is  far 
more  likely  to  get  new  business  than  a  stranger  ;  he 
can  point  to  his  old  appli cants  and  say,  "  here  are  men 
whom  I  insured  some  years  ago  ;  they  keep  their  poli- 
cies in  force,  and  are  satisfied  with  them."  His  charac- 
ter now  bears  its  fruit. 


50  INSTRUCTION  BOOK 


CHAPTER   V. 

INFORMATION   NEEDED   BY   THE    AGENT. 
Should  know  •what  Life  Insurance  is. 

SUPPOSE  a  lady  calls  at  a  drygoods  store,  the  clerk 
shows  her  a  piece  of  goods,  and  the  following  conver- 
sation takes  place:  "What  kind  of  material  is  this 
made  of?"  she  asks,  "is  it  cotton,  woolen  or  silk?" 
"Oh,  I  do  not  know,"  replies  the  clerk,  "it  is  cloth, 
and  that  is  all  I  know  about  it."  "  But  is  it  the  spring 
style  or  is  it  a  remnant  left  over  from  last  year  ?"  "I  do 
uot  know,  madam;  it  is  cloth,  and  it  is  my  business  to 
sell  it  for  so  much  a  yard."  "  Is  it  fast  colors — will  it 
wash  ?"  "I  do  not  know  ;  you  had  better  buy  it  and 
try."  "  But  this  is  for  gentlemen's  wear;  I  want  some- 
thing for  a  dress."  "  Oh,  that  will  make  no  difference, 
if  the  dress  is  made  to  fit,  it  will  wear  just  the  same. " 
Now  how  valuable  would  such  a  clerk  be  to  a  merchant 
who  wished  to  work  up  a  first-class  retail  trade  in  a  fa- 
shionable street  ?  To  sell  goods  readily,  a  clerk  must 
know  what  the  goods  are,  and  their  various  qualities. 
But  a  good  clerk  will  often  sell  a  piece  of  goods  to 
a  customer  when  she  had  no  idea  of  purchasing.  "Now, 
madam,"  he  says,  "here  is  a  new  style  of  silk  ;  it 
is  just  imported,  and  you  are  the  first  customer  who 
has  had  the  pleasure  of  examining  it.  See  what  a 
gloss  it  has,  and  how  fine  its  texture,"  and  as  he  holds 
it  up  to  the  light,  the  customer  is  perfectly  enchant- 
ed with  it,  and  as  the  clerk  dilates  upon  its  beau- 
ty and  good  qualities,  she  is  more  and  more  convinced 
that  she  needs  it,  and  finally  concludes  that  she  cau- 
not  do  without  it,  and  the  clerk  sells  her  a  bill  of 
goods. 

If  an  agent  goes  before  the  public  like  clerk  No.  1, 
and  says,  "  Gentlemen,  I  have  several  kinds  of  insur- 
ance for  sale  here,  with  the  prices  given  in  this  little 
book,  but  I  do  not  know  the  difference  between  these 
plans — which  are  adapted  to  your  peculiar  situations  and 
which  are  not;  like  the  boy  at  the  show,  you  pays  your 
money  and  you  takes  your  choice  ;  but  this  fact  you 
may  depend  upon,  the  more  money  you  pay  for  premi- 
ums, the  higher  commission  I  shall  get,  so  let  me  have 


FOR  LIFE  AGENTS.  51 

your  applications  for  $10,000  apiece,"  it  cannot  for  a 
moment  be  supposed  that  these  inducements  would  be 
very  efficacious,  or  that  his  proposal  would  be  immedi- 
ately accepted  ;  but  this  is  almost  the  very  course 
which  many  agents  take.  With  no  preliminary  training 
or  study  of  the  subject,  with  no  fixed  ideas  of  insurance 
as  a  business,  they  stuff  their  pockets  with  pamphlets 
and  commence  soliciting.  When  asked  any  pertinent 
questions  they  will  say  that  their  company  will  do  as 
well  as  any  in  the  United  States,  or  that  all  plans  of  in- 
surance are  good,  but  as  high-priced  articles  are  usually 
of  a  better  quality  than  cheap  ones,  so  short-term  en- 
dowments are  much  better  for  a  man  than  whole  life 
rates.  On  this  subject  Mr.  Cornelius  Walford,  of  En- 
gland, makes  the  following  pertinent  remarks  : 

"  With  agents  of  insurance  companies  the  proverb 
that  'knowledge  is  power,'  applies  with  peculiar  force. 
The  man  who  knows-most  of  the  theory  and  practice 
of  the  particular  branch  of  insurance  which  he  is  en- 
gaged in  advocating,  should,  all  other  things  being 
equal,  be  the  most  valuable  agent  to  his  particular  com- 
pany. In  addition  to  a  general  knowledge  of  the  busi- 
ness, the  agent  requires  to  know  not  only  every  point 
concerning  his  own  office,  but  also  a  great  deal  con- 
cerning others  ;  by  these  means  only  will  he  be  able  to 
make  way  in  these  days  of  increasing  competition." 

Or,  in  the  words  of  Mr.  Philip  Sayle  : 

"Perhaps  the  most  damaging  and  most  incomprehen- 
sible evidence  of  the  narrow-minded  agent  is  found  in 
the  limited  view  he  takes  of  the  principles  and  applica- 
tion of  the  science  with  which  he  is  associated.  Su- 
perficially he  knows  the  application  of  the  different 
modes  of  insurance  put  forth  in  the  prospectus,  but 
ask  him  for  the  reason  of  certain  processes,  and  he  is 
all  '  at  sea. '  He  fails  to  observe  that  the  '  sign  of  the 
times  '  is  to  require  not  merely  a  human  machine  that 
can  fill  up  a  proposal  form  and  collect  a  premium,  but 
an  intelligent,  thinking  agent,  who  can  freely  converse 
on  the  subject,  and  explain  the  principles  on  which  the 
matter  is  conducted.  The  great  publicity  which  is  now 
given  to  assurance  matters,  and  the  evident  reaction 
which  has  set  in  in  favor  of  the  subject  both  here  and 
abroad,  will  compel  all  who  intend  to  prove  themselves 
valuable  agents  to  post  themselves  up  in  that  informa  - 
tion  which  once  belonged  exclusively  to  the  actuary." 

Adaptation  of  Different  Plans. 

But  suppose  that  the  agent,  educated  to  know  the  dif- 
ference between  the  different  classes  of  insurance,  talks 


52  INSTRUCTION  HOOK 

to  men  in  this  style:  "  My  dear  sir,  you  are  engaged  ill 
extensive  stock  speculations;  you  are  making  money  ra- 
pidly, but  in  a  manner  which  is  not  without  its  dan- 
gers. An  endowment  would  be  a  good  investment  for 
these  reasons  :  you  will  get  a  fair  rate  of  interest  on 
your  money,  even  if  you  live  till  your  policy  matures, 
and  if  you  die,  you  will  have  your  life  insured  ;  if  re- 
verses should  come  in  a  few  years,  a  proportional 
amount  of  your  policy  would  be  secured  to  you,  and 
you  can  afford  such  a  kind  of  policy."  To  a  single  man 
who  has  a  liberal  salary  he  says  :  "  Let  me  urge  you 
to  take  a  ten  year  life  policy.  In  a  few  years  you  will 
be  married  and  your  family  expenses  will  be  increasing. 
After  ten  payments,  you  will  have  no  more  premiums 
to  pay,  but  if  in  a  mutual  company,  the  amount  of 
your  insurance  will  be  increasing  as  long  as  you  live. 
This  is  exactly  the  kind  of  policy  you  need."  To  a 
man  in  moderate  circumstances  with  a  large  family  he 
says  :  "  You  need  an  annual  payment  life  policy  ;  you 
cannot  afford  anything  more  expensive,  and  in  this  man- 
ner you  will  get  the  greatest  amount  of  insurance  with 
the  least  expenditure  of  money.  It  is  precisely  what  is 
adapted  to  your  circumstances." 

Now  the  agent  who  understands  the  advantages  and 
disadvantages  of  the  various  plans,  will  not  offer  every 
man  the  same  kind  ;  he  will  take  care  to  inform  him- 
self what  is  best  adapted  to  the  wants  of  the  applicant, 
and  then  he  will  explain  to  him  how  and  why  it  is  he 
needs  that  particular  kind  of  insurance.  Biit  in  order 
to  judge  correctly,  he  must  know  the  fundamental  prin- 
ciples of  the  business.  A  few  years  ago  it  was  very 
different;  then  nearly  all  the  policies  were  on  the  whole 
life  plan  ;  it  was  Hobson's  choice  with  the  agent  and 
the  assured  ;  now  nearly  every  company  has  about 
thirty  or  forty  different  rates  for  the  same  age,  and  new 
plans  are  being  invented  every  year,  with  more  or 
less  excellences  or  defects.  An  agent  must  understand 
these  differences  ;  he  must  be  able  to  explain  them  and 
point  out  their  faults.  It  is  not  necessary  for  him  to  go 
through  the  whole  list,  discussing  each  rate,  but  when 
called  upon  for  an  explanation  of  a  particular  premium, 
he  should  be  able  to  give  it  in  a  clear  and  satisfactory 
manner. 

New  Plans  and  Features. 

Every  year  new  plans  and  new  features  are  presented 
to  the  public.  Some  companies  adopt  them,  and  by  a 
series  of  hypothetical  calculations,  explain  how  the  in- 
surance will  be  afforded  almost  or  quite  for  nothing. 


FOR  LIFE  AGENTS.  53 

One  agent  is  told  that  another  is  doing  a  successful 
business  on  this  "  new  plan,"  and  he  wants  his  compa- 
ny to  adopt  it.  If  the  officers  of  the  company  see 
through  the  shallowness  of  any  pretension  and  refuse 
to  touch  it,  he  thinks  they  are  too  conservative.  But 
an  agent  with  a  clear  understanding  of  life  insurance 
will  be  able  to  tell  the  wheat  from  the  chaff,  and  the 
new  plans  of  other  companies  will  not  give  him  much 
trouble. 

Agents  must  instruct  the  Public. 

Another  reason  why  agents  should  be  well  posted  in 
the  principles  of  the  science  is  that  the  outside  public 
depends  almost  wholly  upon  them  for  its  knowledge  of 
the  business.  Men  who  have  never  made  it  a  subject 
of  careful  study  know  no  more  how  to  analyze  the  an- 
nual statement  of  a  life  insurance  company  than  how 
to  dissect  a  corpse.  Usually  those  only  who  come  in 
contact  with  agents  have  any  clear  idea  of  the  import- 
ance of  such  knowledge.  Since  it  is  a  part  of  the  duty 
and  mission  of  agents  to  educate  the  public  on  this 
subject,  how  important  it  is  that  they  should  be  able  to 
do  it  welL  How  can  we  account  for  the  fact  that  juries, 
in  a  life  insurance  case,  are  so  often  prejudiced  against 
the  company,  and  no  matter  what  the  evidence  may  be, 
they  so  often  decide  against  it  ?  Are  not  the  companies 
to  blame  for  this  ?  Had  they  employed  trustworthy  and 
well-informed  agents,  who  would  not  or  could  not  make 
misrepresentations,  there  would  not  be  so  many  peo- 
ple who  look  upon  life  insurance  as  a  scheme  to  get 
their  money  and  return  them  little  or  none. 

Insurance  Literature. 

The  best  men  in  any  profession  are  those  who  keep 
themselves  fully  informed  of  the  latest  news  and  disco- 
veries in  their  business.  It  is  so  in  law,  medicine,  and 
every  science.  Within  the  last  few  years  nearly  every 
business  has  produced  its  special  organs.  Even  the 
manufacture  of  paper,  iron,  and  tobacco  have  their  reg- 
ular journals  devoted  to  these  trade.  Insurance  is  no 
exception  to  this  rule.  Insurance  books  and  papers 
must  be  read  if  agents  mean  to  succeed.  There  is  no 
need  of  reading  all  of  them;  but  a  judicious  selection 
can  be  made  which  will  not  involve  a  great  expense  and 
which  will  be  of  great  value.  In  insurance  periodicals 
they  will  find  articles  explaining  the  science,  the  plans 
adopted  by  different  companies,  charts,  tables  and  sta- 
tistics, showing  their  standing  and  progress.  There  are 
elementary  books  which  explain  the  science,  reports  of 


54  INS TR UGTION  BOOK 

insurance  officials,  giving  the  standing  of  the  compan- 
ies in  detail,  and  their  opinions,  which  are  often  impor- 
tant and  instructive.  A  little  careful  observation  will 
show  that  the  most  successful  men  in  any  business  are 
those  who  are  fully  posted  in  it,  and  are  the  first  to  seize 
every  advantage  as  fast  as  it  is  offered. 

Need  not  be  an  Actuary. 

A  private  in  the  ranks  should  know  the  company 
movements,  but  it  is  not  necessary  for  him  to  compre- 
hend all  the  manoeuvres  of  a  brigade  drill.  It  is  the 
business  of  his  captain  and  colonel  to  understand  them. 
His  duty  is  simply  to  obey  intelligently  the  orders  of 
the  captain,  and  they  are  confined  to  the  school  of  the 
company.  This  example  illustrates  the  wants  of  an 
agent.  There  is  a  certain  amount  of  information  about 
insurance  which  he  must  possess  in  order  to  succeed  ; 
but  there  are  many  things  which  are  not  necessary  for 
him  to  understand.  If  an  agent  has  only  a  smattering 
of  actuarial  knowledge,  and  relies  mainly  upon  it  to  con- 
vince the  public  of  the  need  of  insurance,  it  is  apt  to  be 
a  damage  rather  than  a  benefit  to  him.  If  he  perplexes 
his  customer  with  formulas,  figures  and  ratios,  and  ci- 
phers it  down  to  the  nearest  cent  just  how  much  his 
death  claims  and  surplus  interest  will  be,  and  what  rate 
per  cent,  he  will  make  on  his  investment,  the  man  loses 
his  way  in  the  chaos  of  figures,  and  the  probability  is 
that  the  application  will  be  lost.  This  sort  of  discourse 
should  never  be  voluntarily  offered.  If  explanations 
are  asked,  they  should  be  given  in  a  simple,  clear  and 
correct  manner.  It  is  well  enough  to  make  a  few  sim- 
ple statements,  such  as  the  premiums  during  any  peri- 
od, or  an  illustration  of  the  benefits  of  insuring,  but  if 
an  agent  attempts  to  demonstrate  to  his  friend  that  by 
the  contribution  plan  or  any  other  plan  his  annual  pre- 
miums will  net  him  from  thirty  to  forty  per  cent,  divi- 
dend as  a  clear  profit  in  the  transaction,  if  the  listener 
is  a  man  of  much  intelligence,  he  will  suspect  that  life 
insurance  companies  depend  upon  exaggeration  for  their 
prosperity.  An  agent  makes  a  great  mistake  when  he 
undertakes  to  explain  the  whole  science  in  order  to  se- 
cure an  application.  The  agent  should  be  able  to  give 
satisfactory  answers,  but  a  man's  attention  should  not 
be  drawn  away  from  this  leading  thought,  that  he  needs 
insurance  as  a  protection  for  his  family  in  case  of  death. 
If  he-  objects  that  the  science  is  deceptive,  that  the  co- 
operative style  of  insuring  is  safer  and  cheaper,  or  is 
skeptical  on  any  point,  the  agent  should  be  able  to  meet 


FOR  LIFE  AGENTS.  55 

these  objections  in  a  clear  and  conclusive  manner  ;  bat 
ordinarily  he  will  do  well  to  avoid  abstruse  mathema- 
tics. 

It  is  sometimes  said  that  "there  is  no  need  of  an 
agent's  knowing  anything  aBout  the  science  of  insur- 
ance, because  he  gets  an  idea  that  figures  will  not  lie, 
and  by  placing  constant  reliance  upon  them,  he  loses 
the  application."  It  is  not  the  knowing,  but  it  is  the 
telling  of  this  kind  of  information  at  unseasonable  times 
which  causes  the  trouble.  It  is  important  for  a  minis- 
ter to  understand  Greek,  and  for  a  lawyer  to  know  some- 
thing of  Latin,  but  the  former  would  make  but  few  con- 
verts by  quoting  the  Septuagint,  and  the  latter  would 
not  influence  a  jury  by  repeating  passages  from  the 
Pandects  in  the  original.  A  life  insurance  agent,  like 
any  one  else,  can  make  himself  ridiculous  by  an  osten- 
tatious parade  of  his  knowledge,  if  he  has  a  weak  un- 
derstanding or  excessive  vanity.  But  if  he  shows  the 
same  discretion  as  other  business  men,  he  will  find  that 
all  the  information  he  can  acquire  will  aid  him  in  pre- 
senting the  truth  in  new  and  forcible  ways . 

Should  understand  Interest  and  Discount 

An  agent  should  have  sufficient  knowledge  of  arith- 
metic to  perform  all  the  ordinary  operations  in  interest 
and  discount  in  a  rapid  and  accurate  manner.  It  some- 
times happens  that  a  man  wants  to  count  the  cost  for  a 
series  of  years  ahead,  or  know  the  comparative  profits 
of  investing  in  insurance  or  -some  other  security.  On 
such  occasions  a  simple  illustration,  neatly  and  correct- 
ly prepared  by  means  of  the  tables,  which  are  easily  ac- 
cessible, will  be  of  great  service  in  producing  convic- 
tion. 

Well  posted  about  his  own  Company. 

An  agent  should  be  thoroughly  informed  about  the 
financial  history,  condition  and  success  of  his  own 
company.  This  information  can  easily  be  obtained 
from  the  State  reports  or  from  the  printed  circulars  is- 
sued from  the  home  office.  He  should  be  thoroughly 
acquainted  with  all  its  plans  and  peculiar  features,  and 
if  necessary,  he  should  spend  time  in  giving  them  a 
careful  investigation.  If  practicable,  he  should  have  a 
few  special  examples,  showing  the  benefits  derived  from 
certain  policies.  He  should  examine  every  table  of 
rates  and  be  able  to  select  any  premium  on  the  slight- 
est notica  He  should  read  all  the  advertising  pam- 
phlets of  the  company ,  and  thus  he  will  know  just  what 


56  INSTEUCTION  BOOK 

is  needed.  If  there  is  any  new  feature  which  the  com- 
pany makes  a  specialty,  he  should  know  all  about  it 
and  how  it  compares  with  the  plans  of  other  compan- 
ies. If  the  company  has  any  definite  rules  about  sur- 
render values,  he  should  k"now  what  they  are,  so  that 
he  can  always  avoid  making  misstatements  on  the  sub- 
ject, but  if  this  information  is  withheld  from  him,  he 
has  no  right  to  assert  that  the  company  adopts  any  par- 
ticular practice  or  rule,  but  he  can  only  say  that  the 
matter  is  in  the  hands  of  the  officers,  and  that  they 
consider  both  the  wants  of  the  policy-holder  leaving 
the  company  and  the  rights  of  those  who  remain. 
Whenever  the  company  makes  any  change  in  its  meth- 
ods of  doing  business,  every  agent  ought  to  be  in- 
formed of  it  and  clearly  comprehend  its  nature.  But 
although  an  agent  should  be  so  familiar  with  his  own 
company,  he  should  not  make  this  the  principal  basis 
of  his  argument  when  soliciting.  He  must  talk  some- 
thing else  besides  "  company  "  to  a  man  in  order  to  in- 
sure him.  The  old  and  familiar  name  of  the  company, 
the  respectability  of  the  directors,  its  favorite  plans, 
conferring  unheard-of  advantages — all  these  will  not 
suffice  unless  the  agent  makes  the  need  of  insurance  the 
principal  motive  for  taking  a  policy. 

Knowled§e  of  Human  Nature. 

We  have  come  now  to  the  most  important  qualifica- 
tion of  an  agent :  He  should  understand  human  net- 
ture  thoroughly.  He  may  understand  life  insurance  well, 
he  may  know  all  about  his  company,  he  may  be  able  to 
demonstrate  the  financial  value  of  insurance  to  the 
nearest  cent,  yet  all  this  will  fail  unless  he  knows  men. 
A  physician  may  know  all  about  the  properties  of  me- 
dicine, but  if  he  knows  nothing  of  the  human  sys- 
tem in  health  or  disease,  then  he  will  make  some 
fatal  blunders  in  attempting  to  cure  patients.  A  phy- 
sician comes  to  the  bedside,  he  feels  the  pulse,  looks 
at  the  tongue,  and  hears  the  story  of  the  patient,  and 
then  decides  what  ails  him,  and  what  medicine  is  need- 
ed. So  in  life  insurance,  an  agent  talking  with  a  man 
about  his  business,  his  prospects  in  life,  his  circum- 
stances and  family,  can  determine  what  plan  of  insur- 
ance will  suit  him,  or  whether  he  cares  very  little  about 
the  subject.  When  he  makes  a  new  acquaintance,  he 
should  ask  himself,  ' '  What  arguments  will  have  the 
most  influence  on  him  ?  Where  are  his  approachable 
points  ?  Is  he  an  impulsive  man,  one  whom  I  can  in- 
sure at  a  single  interview  if  I  get  a  fair  chance  to  pre- 


FOR  LIFE  AGENTS. 


67 


sent  the  subject,  or  is  he  slow  in  coming  to  a  conclu- 
sion— one  who  will  need  to  ponder  over  the  matter  a 
long  time  ?  It  is  this  power  of  reading  character  at  a 
glance  which  gives  some  agents  their  great  superiority 
over  others;  they  form  their  conclusions  with  lightning 
rapidity  and  act  accordingly. 


58  IN8TR UCTION  BOOK 


CHAPTER   VL 
WHAT  TO  AVOID. 

IN  this  chapter  we  shall  discuss  some  of  the  faults 
which  agents  are  apt  to  adopt,  and  endeavor  to  give 
them  a  word  of  caution  which  may  save  them  from  mak- 
ing fatal  blunders. 

Too  much  Talking. 

It  sometimes  nappens  that  an  agent  believes  that  the 
way  to  insure  a  man  is  to  talk  insurance  to  him  as  long 
as  he  is  willing  to  listen.  This  is  often  a  fatal  mistake. 
In  purchasing  insurance,  men  are  laying  themselves  un- 
der obligation  to  make  a  regular  payment  of  money  for 
several  years,  or  for  life,  and  as  a  general  rule  they  can- 
not decide  upon  the  matter  at  the  first  interview,  espe- 
cially if  the  policy  is  a  large  one.  Most  men  are  rather 
slow  in  making  up  their  minds  about  incurring  further 
obligations,  and  conviction  must  come  gradually.  If  a 
man  has  had  arguments  in  favor  of  life  insurance  pre- 
viously presented  to  him  by  other  agents,  and  has  a 
clear  idea  of  what  life  insurance  is,  then  one  or  two 
convincing  arguments  may  be  all  that  is  needed,  or  if 
the  sum  is  so  small  that  he  feels  that  it  makes  little  or 
no  difference  with  him  financially,  the  agent  may  be 
able  to  insure  him  with  little  hesitation.  The  first 
question  in  his  mind  should  be,  "  Do  I  need  this  insur- 
ance ?"  This  is  the  main  point  in  persuading  a  man  to 
insure  ;  if  he  can  be  made  to  believe  this,  then  the  rest 
is  not  so  difficult.  When  this  is  answered  in  the  affirm- 
ative, the  next  is,  "  How  much  can  I  be  sure  of  paying 
for  ?"  Neither  of  these  questions  can  be  promptly  an- 
swered, unless  he  has  carefully  considered  the  matter 
beforehand. 

The  agent  should  confine  himself  to  argument  and 
avoid  lecturing.  The  applicant  should  be  encouraged 
to  ask  questions  and  suggest  objections  if  he  feels  dis- 
posed. In  this  way  he  will  take  more  interest  in  the 
subject  and  give  greater  attention.  Having  discovered 
the  strong  points  in  a  man's  character,  and  the  princi- 
pal reasons  which  have  hitherto  caused  him  to  remain 
uninsured,  the  agent  should  make  those  his  principal 


FOR  LIFE  AGENTS.  59 

points  of  attack.  If  the  man  is  convinced  that  he 
needs  insurance,  and  is  resolved  to  take  as  much  as  he 
needs,  the  work  is  done  ;  there  is  no  necessity  of  ex- 
plaining the  whole  science  to  him.  It  looks  too  much  as 
if  the  agent  tried  to  drive  him  into  the  company  nolens 
volens.  Men  may  be  induced,  but  not  compelled  to  in- 
sure. In  all  cases  no  favorable  opportunity  should  be 
lost,  no  advantage  neglected,  but'when  the  man  is  evi- 
dently tired  of  the  subject  and  wishes  the  agent  any- 
where else,  then  it  is  time  to  try  some  other  method,  or 
leave  the  matter  until  another  opportunity. 

By  too  much  talking  he  discusses  many  matters 
which  may  not  be  necessary  to  secure  conviction.  Any 
definite  statements  about  dividends  or  surrender  values 
should  be  avoided,  unless  the  agent  has  the  terms 
which  the  company  authorize  him  to  make,  and  which 
the  company  is  pledged  to  fulfill.  The  same  is  true  in 
regard  to  other  companies;  all  reference  to  them  should 
be  avoided  if  possible.  When  not  needed,  all  allusion 
to  these  subjects  is  so  much  ammunition  thrown  away, 
but  if  insisted  upon,  the  agent  should  state  clearly  and 
precisely  what  the  company  will  do  according  to  the 
terms  of  the  policy,  or  what  has  been  its  practice  here- 
tofore ;  or  he  should  merely  say  that  these  matters  are 
entirely  under  the  management  of  the  officers.  It  is  al- 
ways the  safest  to  leave  out  all  those  topics  which  are 
not  absolutely  necessary  to  win  the  case. 

Denouncing  other  Companies. 

It  is  unwise  for  an  agent  to  make  an  indiscriminate 
onslaught  against  other  companies.  By  so  doing  more 
enemies  than  friends  will  be  made.  If  a  young  physi- 
cian should  commence  practice  in  a  large  town,  and  be- 
gin by  denouncing  all  his  medical  brethren  as  quacks, 
he  might  get  some  patients,  but  it  is  far  more  likely 
that  he  would  have  the  whole  town  arrayed  against  him. 
Almost  every  man  who  has  paid  any  attention  to  life  in- 
surance thinks  favorably  of  some  particular  company  ; 
either  he  has  been  solicited  for  it,  or  has  some  friend  in- 
sured in  it,  or  has  read  some  flattering  statement  about 
it.  For  an  agent  to  say  that  his  company  is  the  only 
one  in  the  country  worthy  of  confidence,  and  that  all 
others  are  vastly  inferior  and  worthless,  is  sheer  non- 
sense. No  matter  what  company  an  agent  may  repre- 
sent, there  are  others  in  the  country  just  as  good  in 
many  respects  as  his,  although  there  may  be  points  in 
which  his  company  excels.  An  intelligent  agent  of  al- 
most any  company  can  take  an  insurance  report  and 


60  INSTRUCTION  BOOK 

show  that  in  some  particulars  his  company  is  to  be  pre- 
ferred to  many  others.  But  if  an  agent  endeavors  to 
make  progress  by  "running  down  other  companies," 
some  one  equally  intelligent  as  he  is  may  take  a  chart  out 
of  his  pocket  and  say  :  "  Your  company  is  far  behind 
others  in  this  and  that  particular  ;  look  at  these  ratios, 
these  assets  and  expenses."  Constant  abuse  of  other 
companies  lays  an  agent  open  to  suspicion  as  a  man 
whose  statements  must  be  taken  at  a  discount.  Many 
will  say,  "  How  is  it  possible,  while  there  are  a  hundred 
life  companies,  that  this  agent  has  got  hold  of  the  only 
reliable  and  safe  one  ?  Life  insurance  is  open  to  all 
for  competition,  like  any  other  business,  and  I  know 
that  there  are  many  companies  honorably  conducted  in 
which  I  -would  trust  my  savings,  with  the  hope  that  my 
family  may  some  day  be  benefited  thereby. "  Another 
reason  why  other  companies  should  not  be  indiscrimin- 
ately denounced  is  because  an  agent  cannot  always 
make  goo  d  such  assertions.  If  a  man  contemplating  in- 
surance once  detects  an  unsound  or  exaggerated  state- 
ment in  ail  agent  who  is  a  stranger  to  him,  he  regards 
him  with  suspicion  afterward,  and  confidence  once  lost 
in  this  manner  can  seldom  be  regained.  This  mode  of 
warfare  has  been  tried  by  companies  as  well  as  by 
agents,  and.  uniformly  fails.  Some  of  our  most  pros- 
perous companies  have  been  the  most  bitterly  assailed 
by  others  through  the  press  and  by  agents,  and  what 
has  been  the  result  ?  They  seemed  to  thrive  under 
abuse  ;  their  own  agents  took  up  the  cause  with  new 
ardor  and  greater  success.  Abuse  is  not  the  weapon 
which  wins  ifa  soliciting  ;  it  is  a  sword  which  cuts  the 
hand  of  him  "who  uses  it,  and  he  who  draws  it  in  an  of- 
fensive warfare  is  usually  the  first  to  sheathe  it.  When 
a  rival  company  is  mentioned  to  an  agent,  it  is  far  bet- 
ter to  say :  "  Such  a  company  is  a  good  one  ;  if  you 
have  insured  in  it  you  have  done  well,  or  if  you  have 
promised  to  insure  in  it  you  will  find  it  worthy  "of  your 
trust;  but  I  can  offer  you  advantages  just  as  good,  and 
in  some  particulars,  I  think  you  can  do  better  with  me." 
Such  an  answer  will  go  much  farther  toward  securing  a 
patient  hearing  and  be  more  likely  to  secure  a  policy 
than  abusing  it  as  a  dangerous  rival.  If,  however,  an 
agent  is  confronted  with  a  company  which  is  evidently 
unsound  and  unworthy  of  confidence,  he  should  not 
hesitate  to  say  so,  if  he  can  give  substantial  reasons  for 
his  opinions  and  prove  his  assertions  by  official  reports 
and  statistics.  JBut  under  all  circumstances  we  do  not 
think  it  is  best  for  him  to  make  a  Don  Quixote  of  him- 
self, and  spend  his  time  on  all  sorts  of  windmills. 


FOR  LIFE  AGENTS.  61 


Advising  Unprofitable  Plans. 

Most  people,  when  called  upon  to  insure,  know  little 
or  nothing  of  the  kind  of  a  policy  they  need  ;  unless 
they  are  somewhat  informed  about  life  insurance,  they 
do  not  know  why  they  will  not  get  just  as  much  insur- 
ance out  of  a  ten  year  endowment  as  out  of  a  ten  year 
term  policy.  They  usually  take  such  kind  of  a  policy 
as  the  agent  recommends  to  them,  and  some  agents, 
who  look  more  to  their  first  commissions  than  the  good 
of  the  company  or  the  policy-holder,  make  a  specialty 
of  short' term  endowments.  It  is  the  agent's  duty  to 
know  what  kind  of  policy  is  best  suited  to  a  man,  tak- 
ing all  his  circumstances  into  consideration,  and  then 
to  advise  him  without  regard  to  self-interest.  As  a  gen- 
eral rule,  the  best  plan  for  a  policy-holder  is  the  best 
for  the  company,  and  also  for  the  agent.  If  the  agent 
talks  nothing  but  ten  year  endowment,  which  the  poli- 
cy-holder does  not  need,  and  which  he  cannot  always 
continue  to  pay  for  ;  after  a  year  or  two  the  latter  will 
surrender  it  and  get  a  paid-up  policy,  and  having  been 
disappointed  once,  he  will  resolve  never  again  to  have 
anything  to  do  with  life  insurance,  and  it  is  not  unlike- 
ly he  will  denounce  the  business  to  his  friends  and 
neighbors  as  an  unmitigated  swindle.  Doubtless  a  part 
of  this  trouble  is  due  to  the  officers  of  the  company  in 
not  grading  the  commissions  so  that  it  would  be  as  pro- 
fitable for  the  agent  to  work  on  one  plan  as  on  another ; 
but  the  fact  cannot  be  denied  that  a  great  part  of  the 
insurance  annually  effected  has  been  hitherto  on  unpro- 
fitable plans,  simply  to  get  the  first  commissions.  Now 
we  hold  that  an  agent  should  insure  a  man  in  such  a 
way,  if  possible,  that  he  will  stay  insured  and  will  ne- 
ver want  to  change,  but  will  continue  to  pay  his  pre- 
miums year  after  year  as  long  as  they  are  due.  While 
agents  should  be  taught  by  the  companies  not  to  work 
for  first  commissions  only,  the  people  who  insure  should 
be  urged  to  keep  their  policies  in  force  as  long  as  pay- 
ment of  premiums  is  required. 

Agents  should  avoid  Odd  Forms  of  Insurance. 

If  the  tables  of  rates  limit  endowments  to  five,  ten, 
fifteen  years,  etc.,  the  agent  ought  not  to  take  an  endow- 
ment payable  in  eleven,  sixteen,  nineteen,  or  any  other 
odd  number  of  years.  Such  policies  usually  require  a 
special  premium  rate  to  be  made,  and  they  are  a  source 
of  great  annoyance  in  the  home  office.  The  same  may 
be  said  of  all  kinds  of  insurance  not  specially  author- 


62  INSTB UCTION  BOOK 

ized  by  the  company.  An  agent  picks  up  a  circular  of 
another  company,  containing  some  peculiar  rates  of 
children's  endowments,  or  some  queer  kinds  of  poli- 
cies, and  he  thinks,  "  If  my  company  would  only  adopt 
those  plans,  how  much  business  I  could  do  !"  The 
fact  is  that  the  great  mass  of  people  who  are  insured 
have  policies  on  the  usual  rates,  and  a  much  larger  pro- 
portion of  policies  lapse  on  these  odd  plans  than  on  the 
regular  methods. 

Extravagant  Statements. 

The  business  of  life  insurance  and  the  record  of  the 
companies  have  been  so  well  known  during  the  past 
few  years,  that  it  is  highly  important  that  an  agent 
should  be  very  careful  in  making  any  statements  about 
the  future  dividends  or  future  progress  of  the  company, 
which  cannot  be  substantiated.  It  may  be  well  enough, 
when  asked,  to  tell  what  the  company  has  done  in  the 
past,  and  to  leave  the  applicant  to  conjecture  the  future 
by  the  previous  record.  The  less  he  has  to  say  about 
this  subject  the  better,  but  people  will  make  inquiries, 
and  the  only  way  to  satisfy  them  is  to  appeal  to  the 
past,  or  to  show  that  his  company  will  do  as  well  as  oth- 
ers have  done.  The  same  is  true  about  future  business. 
No  one  can  predict  what  progress  any  company  will 
make  during  the  next  few  years.  Some  companies 
which  were  formerly  doing  a  small  and  quiet  business, 
have  suddenly  entered  the  front  ranks,  and  others  which 
were  noted  for  their  prosperity,  manifest  but  little  de- 
sire to  obtain  new  risks.  If  the  policy-holder  is  con- 
vinced that  he  will  be  justly  dealt  by,  he  need  have  lit- 
tle concern  about  the  rest.  The  same  is  true  about  the 
different  classes  of  dividends  which  are  heralded  abroad 
as  being  a  wonderful  success.  Now  in  all  kinds  of  div- 
idends these  postulates  are  true  :  A  company  cannot 
divide  surplus  which  it  has  not  got.  In  order  to  get 
this  surplus  the  policy-holder  must  pay  it.  And  last- 
ly, if  one  man  gets  more  than  his  share,  some  others 
must  get  less,  or  it  must  be  made  up  from  lapses.  Any 
specious  claim  that  some  new  arrangement  for  distrib- 
uting the  surplus  is  going  to  produce  wonderful  results 
to  the  average  policy-holder  is  simply  absurd.  We 
have  spoken  thus  freely  about  dividends  because  the 
extravagant  statements  made  concerning  them  have 
been  the  principal  cause  of  disappointment  and  vexa- 
tion among  policy-holders  and  the  lapse  of  their  poli- 
cies. We  hope  that  this  state  of  things  is  passing  away; 
that  the  time  is  near  at  hand  when  the  public  mind  will 


FOR  LIFE  AGENTS.  63 

be  so  well  educated  on  insurance  that  all  "  Great  Ex- 
pectations "  will  be  abandoned  ;  that  people  will  know 
how  to  distinguish  the  true  from  the  false,  and  that  all 
agents  or  companies  whose  principal  stock  in  trade  is 
boasting  and  extravagant  promises,  will  find  their  ' '  oc- 
cupation gone." 

Newspaper  Criticisms. 

An  agent  should  pay  little  or  no  attention  to  the  com- 
ments of  the  newspaper  press  upon  life  insurance.  Not 
one  writer  in  a  thousand  understands  the  science  thor- 
oughly enough  to  give  a  proper  criticism  upon  any  com- 
pany or  plan  of  insurance.  Nor  should  an  agent  ever 
rush  to  the  editor's  sanctum  to  ventilate  his  own  griev- 
ances, or  to  traduce  another  company.  That  is  a  game 
which  two  can  play  at,  and  in  the  end  he  will  injure  the 
whole  business — the  innocent  as  well  as  the  guilty.  If 
a  policy-holder  in  another  company  imagines  himself 
wronged  because  he  does  not  get  sufficient  dividends  or 
surrender  value,  an  agent  should  not  lend  his  assistance 
toward  making  the  fact  public  in  the  newspapers.  This 
is  the  wrong  method  of  dealing  with  other  companies. 

Bogus  Insurance. 

Agents  should  beware  of  all  companies  or  organiza- 
tions which  deal  in  bogus  insurance,  such  as  co-opera- 
tive benefit  societies,  mutual  aid  companies,  or  any  of 
the  concerns  which  pretend  to  insure  people  and  collect 
the  payments  by  voluntary  assessments.  No  agent  can 
have  anything  to  do  with  them  without  being  disgraced 
among  the  insurance  fraternity,  as  much  as  any  citizen 
would  be  if  he  set  up  a  mock  auction  store,  a  faro  bank, 
or  a  brass  jewelry  establishment  Again  and  again 
these  companies  have  been  proved  to  be  swindles  of  the 
basest  kind,  practicing  upon  the  credulity  and  ignor- 
ance of  the  public,  and  gathering  a  rich  harvest  of  fees 
from  their  certificates  of  membership,  which,  as  far  as 
insurance  goes,  are  seldom  worth  the  paper  on  which 
they  are  written.  They  pretend  to  form  classes  of  five 
thousand  each,  and  at  the  death  of  each  member  in  the 
class,  each  of  the  survivors  makes  a  contribution  of  one 
dollar  to  be  paid  to  his  heirs.  Hundreds  of  these  co- 
operative companies  have  been  started  in  this  country 
during  the  last  few  years,  and  when  their  promoters  have 
reaped  a  harvest  of  initial  dues  from  ten  to  twenty  dol- 
lars each,  the  society  has  disappeared.  In  some  of  the 


64  INSTR UCTION  BOOK 

States  the  arm  of  the  law  interposes  and  prohibits  their 
operations  within  its  limits,  in  others  they  are  allowed 
to  flourish  in  full  vigor.  Let  them  alone  ;  no  honest 
agent  can  touch  them  and  retain  his  self-respect  and 
standing.  Dishonest  agents  will  find  but  little  aid  and 
comfort  in  this  book,  except  motives  for  reform. 

Unnecessary  Expenditures. 

Agents  should  avoid  too  great  expenditure  in  getting 
new  business.  A  costly  office  for  one  who  is  just  com- 
mencing, elaborate  furniture  and  huge  gilt  signs,  do 
not  always  pay.  Policy-holders  are  not  taken  by  any 
such  kiud.of  bait.  Selling  life  insurance  and  selling 
drygoods  in  a  retail  store  are  done  on  different  plans. 
In  the  former  case  the  agent  must  go  about  and  hunt 
up  his  customers  and  talk  the  subject  to  them  ;  but  in 
selling  dry  goods,  the  greater  the  display  that  is  made 
at  the  shop  windows  the  better.  Not  one  man  in  a 
hundred  or  thousand  in  this  country  ever  comes  into 
an  office  to  get  insured  of  his  own  accord.  Some  agent 
has  presented  the  subject  to  him,  has  talked  and 
argued  with  him,  and  finally  has  persuaded  him  to 
make  an  application.  The  gilt  sign  did  not  attract 
him,  it  was  the  leaflet  put  into  his  hands  by  the  agent, 
and  the  earnest  words  which  accompanied  it.  An  ex- 
traordinary expenditure  and  costly  adornments  of  an 
office  are  apt  to  excite  suspicion  in  the  public.  They 
look  upon  his  style  and  manner  of  spending  money  as 
an  unfavorable  symptom  for  the  policy-holders  ;  'they 
regard  it  as  a  weakness  or  fault  of  the  company,  and 
hesitate  long  before  they  will  commit  their  funds  to 
such  a  guardianship.  Nor  are  good  agents  attracted 
toward  a  company  by  any  such  means.  They  form 
their  opinions  from  the  official  reports  of  the  State  In- 
surance Departments  more  than  from  any  such  sensa- 
tional displays.  An  extravagant  style  of  carrying  on 
the  business  operates  unjustly  upon  the  members  of 
the  company.  A  life  insurance  company  is  the  treasu- 
ry of  the  hard-earned  savings  of  its  members,  and  not 
a  dollar  ought  to  be  wasted.  But  experience  has  shown 
that  it  does  not  pay  to  get  business  in  this  manner. 
The  most  prosperous  companies  are  those  which  have 
united  energetic  measures  with  economy  in  expendi- 
tures, while  nearly  all  that  have  started  off  with  high 
commissions  and  other  evidences  of  extravagance  have 
done  little  solid  business,  and  now  make  a  sorry  dis- 
play in  the  official  reports. 


FOR  LIFE  AGENTS.  65 


Brokerage. 

Unless  the  policy-holder  lives  in  the  vicinity  of  a 
home  office,  every  premium  should  be  paid  to  an  agent 
who  has  a  direct  interest  in  its  collection.  By  this 
means  the  company  is  less  liable  to  have  the  policy 
lapse  than  if  it  were  left  entirely  to  the  judgment  or 
inclination  of  the  policy-holder  whether  to  keep  np 
his  policy  or  not.  In  collecting  renewals  the  agent  has 
a  good  opportunity  to  ask  the  policy-holder  if  he  does 
not  want  additional  insurance,  or  if  he  has  not  some 
intimate  friend  who  would  probably  insure,  and  he 
can  leave  him  some  statements  respecting  the  finan- 
cial condition  of  the  company  which  will  strengthen 
this  confidence  in  it,  and  prevent  his  policy  from  laps- 
ing. By  the  brokerage  system  all  these  benefits  are 
lost ;  it  is  bad  for  the  company  and  for  the  agent.  It 
is  the  fruitful  source  of  much  of  the  lapsed  and  surren- 
dered business  of  the  present  day.  The  company 
pays  a  higher  commission  to  the  agent  for  the  first  pre- 
mium on  the  condition  that  all  future  commissions 
will  be  avoided.  But  such  policies  are  usually  short 
lived  ones,  and  in  many  instances  the  agent  persuades 
the  policy-holder  to  change  his  policy  to  that  of  some 
other  company  for  the  sake  of  getting  another  first 
commission.  Such  practices  tend  to  degrade  the  busi- 
ness. One  fundamental  idea  in  life  insurance  is  per- 
manence, a  regularity  in  paying  the  premiums  as  long 
as  they  are  due  ;  but  this  course  leaves  the  policy-hol- 
der entirely  to  his  own  inclinations,  and  he  is  apt  to 
lose  all  interest  in  the  company.  It  injures  the  agent  ; 
he  should  accustom  himself  to  look  upon  the  renewals 
as  a  part  of  his  own  property,  and  take  a  pride  in  hav- 
ing them  paid  from  year  to  year. 

Rebate. 

This  is  an  evil  which  has  grown  up  during  the  last 
few  years  among  some  agents,  owing  to  the  excessive 
competition  they  have  to  contend  with,  and  it  has  a 
very  pernicious  influence  on  the  business.  The  prac- 
tice of  giving  a  part  or  the  whole  of  the  first  commis- 
sion to  the  insured  in  order  to  induce  him  to  take  a 
policy  is  what  no  honorable  agent  will  allow.  It  de- 
ranges the  business.  If  a  man  wants  insurance  enough 
to  pay  his  premiums  promptly  during  life,  or  a  series 
of  years,  he  can  pay  the  whole  of  the  first  premium  ;  i'f 
he  will  not  pay  it,  what  dependence  is  there  to  be 


66  INSTRUCTION  BOOK 

placed  ou  his  implied  promise  to  pay  the  renewals  ?  It 
injures  the  success  of  other  agents.  If  such  a  practice 
is  once  commenced  and  openly  proclaimed  in  any 
town  or  city,  other  agents  will  have  to  make  the  same 
terms  or  lose  some  of  their  business.  An  agent  who 
begins  to  cut  under  in  this  style  will  find  other  agents 
combining  against  him  to  injure  his  company,  and  he 
will  not  be  able  to  accomplish  much.  It  is  a  confession 
of  inferior  capacity  in  an  agent  ;  it  shows  that  he  can- 
not succeed  in  the  regular  way,  aud  has  to  resort  to 
some  such  underhanded  means.  If  an  agent  honestly 
earns  his  commissions  he  is  entitled  to  them,  and  he 
injures  himself  and  gets  a  bad  name  among  his  fellow 
workers  if  he  does  not  insist  upon  obtaining  them. 

Intemperate  Men. 

An  agent  should  never  attempt  to  insure  the  life  of  a 
man  who  is  intemperate  or  is  given  to  occasional  ine- 
briety. Such  people  usually  live  only  about  one  third 
as  long  as  strictly  sober  men  of  the  same  age,  and  the 
risk  is  so  great  that  no  respectable  company  will  know- 
ingly issue  a  policy  to  such  an  applicant.  The  words 
of  most  policies  read  that  if  the  assured  shall  die  by 
intemperance  or  delirium  tremens,  the  policy  shall  be 
void,  but  even  partial  intemperance  brings  with  it  a 
host  of  diseases,  any  one  of  which  may  suddenly  carry 
off  the  victim,  and  the  good-natured  family  physician, 
anxious  to  keep  on  good  terms  with  the  family  of  the  de- 
ceased, will  generally  certify  that  he  died  of  brain  fever 
or  apoplexy,  or  anything  else  than  intemperance  ;  and 
too  often  his  friends  will  confirm  the  doctor's  profes- 
sional opinion  on  the  subject.  Let  such  men  alone. 
If  it  once  gets  about  that  an  agent  is  insuring  such  a 
class  of  risks,  sound  and  healthy  men  will  avoid  his 
company. 

Leaflets  and  Premium  Tables. 

An  agent  need  not  make  a  practice  of  giving  away 
the  leaflets  and  prospectus  of  the  company  to  every 
one  with  whom  he  converses  on  insurance.  As  a  gen- 
eral rule  they  are  immediately  thrown  aside  with  hard- 
ly a  passing  glance,  like  all  other  advertising  matter, 
and  only  a  very  few  persons  will  take  the  trouble  to 
notice  them.  But  if  the  man  entertains  any  particular 
objection  to  life  insurance,  and  the  agent  has  a  leaflet 
which  precisely  meets  his  case,  it  is  advisable  to  pre- 
sent him  with  one  and  urge  him  to  read  it 


FOR  LIFE  AGENTS.  67 

"  To  the  mass  the  prospectus  is  a  mysterious  and 
unintelligible  document  which  no  pains  or  scrutiny  can 
unravel.  Again,  as  a  rale,  not  one  in  a  thousand  as- 
sures from  the  influence  of  a  prospectus  alone.  One 
of  the  most — perhaps  the  most — successful  canvassers 
of  past  times  never  gave  a  prospect'us  to  any  assurer,  but 
simply  wrote  the  amount  of  premium  the  proposed  pol- 
icy would  cost,  on  a  slip  of  paper.  As  this  gentleman 
remarked  to  us,  the  assurer  did  not  want  a  whole  book 
full  of  tables;  all  he  wanted  to  know  was,  what  it  would 
cost  him  to  assure  a  specific  sum,  at  his  present  age, 
on  a  certain  table  ;  beyond  that  information  only  be- 
came confusing." — PHUJP  SATLE,  JB. 


68  JZfS TR UCTION  BOOK 


CHAPTER  VII. 

CHOOSING  A  COMPANY. 

Old  and  New    Companies. 

PEOPLE  generally  separate  life  companies  into  two 
classes — the  old  and  the  new.  The  prevailing  idea 
among  them  is  that  the  former  are  those  which  are 
twelve  to  twenty  years  old;  that  their  assets  are  usually 
reckoned  by  millions  ;  they  have  their  agencies  firmly 
planted  in  most  of  the  States,  and  enjoy  the  reputation 
of  being  slow,  safe  and  conservative.  They  profess  to 
take  only  the  best  risks  ;  they  pay  lower  commissions, 
because  their  reputation  is  already  made  ;  they  have 
comfortable  and  often  elegant  offices,  and  are  disposed 
to  take  things  quietly,  looking  out  with  indifference 
upon  their  younger  rivals  who  are  striving  hard  to 
overtake  them.  The  popular  ideas  of  new  companies 
are  not  much  more  correct  or  favorable.  Many  regard 
them  as  experiments,  having  their  reputation  to  make 
and  sustain,  and  coming  in  competition  with  older  com- 
panies, they  have  a  difficult  task  before  them.  To  get 
new  business  they  must  make  greater  sacrifices  and  pay 
greater  commissions.  They  may  make  greater  prom- 
ises, but  it  is  doubtful  whether  they  will  be  realized. 

Now  neither  of  these  popular  views  is  always  correct; 
there  are  some  old  companies  which  are  very  progres- 
sive, and  some  new  ones  which  are  very  conservative. 
Some  old  companies  have  this  advantage,  that  they  are 
so  well  known  that  it  is  less  difficult  to  insure  a  man  in 
one  of  them  than  in  a  new  company,  provided  the  ap- 
plicant has  no  preference.  He  is  more  likely  to  recog- 
nize it  as  an  old  acquaintance,  than  to  express  surprise 
that  it  ever  existed  so  long.  In  new  companies,  an 
agent  has  often  the  choice  of  more  favorable  territory 
than  in  old  ones,  and  in  most  instances  he  can  make 
quite  as  favorable  contracts,  but  he  must  go  forth  with 
the  understanding  that  he  is  a  pioneer.  The  name  of 
his  company  is  a  new  one;  people  are  not  familiar  with 
it  ;  he  must  convince  them  that  it  is  sound  and  well 
managed  ;  that  its  policies  will  be  duly  paid  at  maturi- 
ty; that  the  insured  will  receive  a  due  share  in  the  sur- 
plus premiums  if  it  is  a  mutual  company,  and,  if  there 
are  some  new  plans  or  peculiar  features,  he  must  ex- 


FOR  LIFE  AGENTS.  69 

plain  them  and  convince  the  public  that  here  are  some 
decided  advantages. 

As  a  general  rule,  young  companies  have  greater  ini- 
tial expenses,  such  as  establishing  agencies,  paying  first 
commissions,  etc.,  and  on  the  other  hand,  a  smaller  ra- 
tio of  death  claims,  owing  to  the  more  recent  selection 
of  lives.  But  there  are  other  qualities  which  should 
have  more  influence  with  an  agent  than  the  age  of  a 
company. 

Mutual,  Mixed,  and  Stock  Companies. 

The  three  generic  classes  into  which  all  life  compan- 
ies may  be  divided  are  : 

Mutual  companies,  which  have  no  capital  stock  as  a 
basis,  and  whose  surplus  premiums  are  wholly  divided 
among  the  policy-holders. 

Mixed  companies,  Lu  which  there  is  a  capital  stock, 
usually  of  $100,000  or  more,  as  a  basis  upon  which  the 
company  was  started,  and  upon  which  a  stock  dividend 
is  paid  to  the  shareholders. 

Stock  companies,  with  a  large  capital  stock  as  a  basis, 
and  which  pay  no  surplus  to  policy-holders,  but  issue 
policies  at  reduced  rates  of  premium. 

Without  discussing  the  merits  or  disadvantages  of 
any  one  of  these  classes,  we  shall  simply  set  forth  the 
claims  which  each  presents  to  the  public. 

In  regard  to  the  first  two  of  "these  classes  there  is 
practically  but  little  difference  in  the  advantages  they 
offer.  About  the  only  difference  bet  ween  them  is  the 
$100,000  or  more  capital  stock  as  a  basis,  which  is  lost 
sight  of  when  the  assets  amount  to  a  few  millions.  Some 
mixed  companies  which  are  well  managed  confer  quite 
as  large  benefits  upon  the  insured  as  others  which  are 
purely  mutual. 

Some  of  the  oldest  and  largest  companies  iu  this 
country  were  started  without  a  dollar  of  capital,  and 
solely  through  the  energy,  popularity  and  rectitude  of 
their  officers,  their  assets  are  now  numbered  by  tens  of 
millions.  During  the  past  few  years  the  legislation  of 
many  of  the  States  has  prevented  any  new  company  be- 
ing put  into  the  field  with  less  than  $100,000  capital, 
and  some  of  the  mixed  companies  have  become  mutual 
by  retiring  their  stock. 

In  choosing  a  company,  the  distinction  between  mu- 
tual and  mixed  companies  should  have  very  little  weight 
with  the  agent ;  he  should  look  more  carefully  to  other 
things — its  officers,  management,  etc. 

In  regard  to  stock  companies,  the  csise  is  somewhat 
different  It  is  evident  that  during  the  next  few  years 


70  IN8TR UCTION  BOOR 

the  great  battle  of  facts,  arguments  and  statistics  is  to 
be  fought  between  these  two  systems  of  insurance.  The 
mutual  companies  (which  will  include  the  mixed)  are  in 
the  majority  more  than  twenty  to  one;  claim  that  they 
furnish  safer  insurance  than  stock  companies,  because 
the  margin  or  loading  protects  the  company  against  the 
consequences  of  extraordinary  mortality  ;  that  the  in- 
surance in  the  end  is  cheaper  because  all  the  surplus 
profits  are  returned  to  the  insured,  and  that  the  success 
of  mutual  companies  is  an  established  fact,  while  that 
of  stock  companies  is  still  an  experiment. 

On  the  other  hand,  the  advocates  of  stock  companies 
claim  that  the  rates  of  interest  in  this  country  fully  jus- 
tify the  reduction  of  premiums  to  the  present  standard; 
that  their  capital  stock  is  fully  sufficient  to  carry  them 
over  the  trial  period  of  youth,  until  the  interest  on  the 
reserves  will  render  their  ultimate  safety  certain  ;  that 
the  insurance  is  cheaper,  because  the  reduction  of  pre- 
mium is  practically  a  dividend  in  advance  ;  that  the 
contract  is  simpler,  more  definite,  and  less  liable  to 
cause  dissatisfaction,  because  there  is  no  room  for  mis- 
understanding about  the  quantity  of  surplus  premiums 
or  the  method  of  its  division  ;  and  finally,  that  the 
facts  and  statistics  upon  which  the  stock  companies  are 
based  are  taken  from  the  experience  of  the  mutual  com- 
panies during  the  past  twenty  or  thirty  years. 

Character  and  Standing  of  the  Officers. 

This  is  the  most  important  point  for  the  agent  to  ex- 
amine, but  unfortunately  it  is  the  one  which  is  usually 
the  most  neglected.  It  is  the  official  staff  of  a  compa- 
ny which  gives  it  its  standing,  and  unless  their  charac- 
ters, business  qualities  and  professional  skill  will  bear  a 
rigid  inspection,  an  agent  is  perfectly  safe  in  looking 
somewhere  else  for  employment. 

Now  an  agent,  before  he  accepts  an  agency,  has  a 
large  number  of  companies  to  select  from,  and  it  is  his 
own  fault  if  he  does  not  choose  one  which  is  properly 
managed.  It  is  not  enough  to  say  that  any  company 
will  do  if  it  pays  high  commissions.  High  commissions 
are  sometimes  the  penalty  which  companies,  or  rather 
the  policy-holders,  have  to  pay  for  bad  management  or 
want  of  public  confidence. 

It  is  not  so  very  difficult  for  an  agent  to  learn  the 
truth  about  the  officers  of  a  company.  By  making  the 
necessary  inquiries  in  the  place  where  the  company  is 
located,  all  the  necessary  information  can  be  had.  If 
lie  was  going  to  deposit  his  own  money  in  a  bank,  he 


FOR  LIFE  AGENTS.  71 

would  probably  find  out  something  about  its  standing 
and  creiit.  The  same  rule  applies  with  still  greater 
force  to  an  agent.  It  is  a  duty  which  he  owes  to  those 
whom  he  insures.  He  should  not  ask  a  man  to  pay 
money  into  a  company  unless  he  is  satisfied  that  it  will 
be  taken  proper  care  of,  and  when  any  of  his  appli- 
cants ask  him  about  the  standing  of  the  officers,  he 
ought  to  be  able  to  give  them  a  satisfactory  and  truth- 
ful answer.  There  are  companies  enough  whose  offices 
answer  the  description  given  above,  and  no  honorable 
and  trustworthy  agent  need  fail  of  finding  one  which  is 
fit  to  be  trusted  with  the  funds  of  policy-holders. 

New  Plans  of  Insurance. 

An  agent  should  not  place  too  much  dependence 
upon  new  plans  and  features.  A  new  plan  may  be 
attractive,  or  may  be  an  improvement,  but  it  cannot 
be  depended  upon  to  get  business.  A  man  buys  an 
overcoat  because  he  needs  one  to  keep  him  warm.  He 
does  not  often  buy  one  just  for  the  sake  of  getting  one 
of  a  peculiar  style  or  cut.  It  is  so  in  life  insurance  ;  a 
man  insures  for  compensation  in  case  of  death,  not  for 
the  sake  of  some  peculiar  idea.  If  he  really  wants  in- 
surance, he  may  choose  the  new  plan,  but  if  not,  the 
new  feature  will  be  hardly  any  temptation  to  him. 

Nearly  all  new  plans  can  be  reduced  to  three  classes : 

1.  Different  methods  of  paying  the  premiums.      If  a 
man  has  a  ten  premium  life  policy  he  must  pay   a 
larger  annual  premium  than  if  the  payments  were  con- 
tinued during  his  whole  life  ;  the  more  premiums  he 
pays  the  smaller  they  will  be  on  the  same  amount  of  a 
life  policy,  and  vice  versa ;  just  like  filling  a  measure 
with  apples,  the  larger  the  apples  the  less  number  will 
be  required.     In  this  matter  the  agent  should  clearly 
understand  the  effect  which  large  and  small  premiums 
have  on  the  amount  of  insurance  actually  obtained. 

2.  Different  methods  of  returning  the  surplus.  Here  there 
is  more  room  for  misunderstanding  and  deception.     A 
company  cannot  distribute  surplus  which  it  has  not  got, 
and  it  is  absurd  to  suppose  that  by  any  particular  plan 
each  one  of  all  the  policy-holders  in  a  company  will  get 
a  larger  amount  of  surplus  by  one  plan  than  by  ano- 
ther.   A  new  patent  or  copy-righted  arrangement  for 
computing  surplus  is  usually  a  method  of  robbing  Peter 
to  pay  Paul. 

3.  Different   privileges    and   restrictions.      The  gen- 
eral tendency  of  companies  is  to  allow  policy-holders 
many   privileges   which  were  formerly  denied   them. 


72  IN8TR UGTION  BOOK. 

How  far  this  letting  down  the  bars  is  advantageous  we 
do  not  decide.  Travel  and  residence  in  unhealthy 
countries,  and  occupations  which  tend  to  shorten  life, 
may  be  necessary  for  some  men  to  support  themselves, 
and  some  companies  see  fit  to  charge  such  policy-hold- 
ers an  extra  rate  for  the  extra  risk  incurred.  But  since 
some  companies  hold  out  these  "  liberal  features  "  as 
special  inducements  to  policy-holders,  the  agent  should 
give  them  a  proper  examination. 

Experience  has  proved  that  a  new  plan  or  a  new  fea- 
ture may  be  a  good  thing  ;  but  some  companies  with 
several  new  plans  have  done  little  business,  and  others 
with  no  new  features  are  among  the  most  prosperous 
in  the  country  ;  and  therefore  in  choosing  a  company 
an  agent  should  consider  all  these  specialties  as  of 
little  consequence.  There  are  other  qualities  of  far 
more  importance. 

Methods  of  Doing  Business 

Every  company  of  any  prominence  has  some  peculiar 
ways  or  methods  of  its  own  in  the  management  of  its 
business,  depending  entirely  upon  the  ideas  and  indi- 
viduality of  its  officers.  The  administration  of  some 
companies  is  conducted  on  the  principle  that  they  must 
get  business  at  any  cost,  applications  must  flow  in  by 
every  mail,  the  medical  examiner  must  let  in  all  who 
can  show  a  reasonable  probability  of  living,  and  the 
agent's  ability  is  gauged  by  the  amount  of  insurance 
obtained.  Expenditures  are  of  no  account,  for  to  make 
money  the  company  must  spend  money.  After  a  while 
such  companies  wake  up  to  a  consciousness  that  this 
does  not  pay.  They  find  that  their  policies  are  short 
lived,  and  their  ratio  of  death-claims  is  great.  Then 
comes  a  spasm  of  economy  :  expenses  are  cut  down, 
agents'  contracts  are  changed,  less  insurance  is  done, 
and  the  company  settles  down  to  a  conservative  method 
like  those  companies  which  they  so  much  denounced 
for  their  old  fogy  traits. 

There  is  another  extreme  :  A  company  may  be  so 
very  conservative  that  it  never  succeeds  ;  its  plans  of 
insurance  may  be  faultless,  its  officers  may  be  men  of 
spotless  reputation  and  undoubted  honesty,  the  affairs 
of  the  company  may  be  carefully  managed,  but  it  never 
grows  very  fast.  Agents  do  not  like  to  work  for  it ; 
they  leave  for  other  more  wide  awake  companies,  and 
it  does  not  prosper.  The  trouble  here  is  that  the  com- 
pany  is  not  managed  on  correct  business  principles. 
A  want  of  liberality  to  agents,  of  energy  on  the  part  of 


FOR  LIFE  AGENTS.  73 

the  officers,  and  a  failure  to  adopt  such  methods  of 
winning  the  favor  of  the  public  have  caused  this  state 
of  things.  What  was  expedient  ten  or  fifteen  years 
ago  is  pass6  now.  The  officers  have  not  the  tact  to 
adapt  themselves  to  the  changes  which  have  been  going 
on,  and  the  company  falls  behind. 

An  agent  should  make  up  his  mind  that,  next  to  his 
own  energy  and  perseverance,  his  success  will  depend 
greatly  upon  the  views  which  the  president  or  manager 
of  the  company  takes  of  the  business  ;  and  if  the  latter 
is  not  adapted  to  his  place,  or  if  his  views  are  absurd 
or  obsolete,  his  own  career  with  the  company  can  never 
be  a  profitable  or  an  agreeable  one. 

Reputation  of  the  Company  with  Policy-holders. 

A  company  should  have  a  good  reputation  among 
its  own  policy-holders.  If  they  are  dissatisfied  with 
the  company  after  having  been  insured  in  it  for  several 
years,  then  there  is  good  reason  to  examine  their  objec- 
tions. One  way  of  looking  at  this  is  by  examining  the 
State  Insurance  Reports,  and  to  keep  posted  by  reading 
reliable  insurance  journals  ;  but  outside  of  journals 
devoted  strictly  to  insurance  the  newspaper  opinions 
of  companies  are  worth  little  or  nothing. 

Past  History  of  the  Company. 

Thanks  to  the  American  system  of  publicity,  the  past 
history  of  almost  any  company  doing  business  in  the 
United  States  can  be  pretty  accurately  known.  The 
Insurance  Reports  are  accessible  to  all  and  in  them 
we  find  the  complete  statistical  history  of  all  the  impor- 
tant companies.  There  is  no  excuse  for  an  agent  to 
say  that  he  had  no  opportunity  to  investigate  the  com- 
pany before  he  became  connected  with  it.  This  is 
knowledge  which  it  is  absolutely  necessary  for  him  to 
have  before  he  can  meet  the  objections  of  the  agents  of 
other  companies. 

Agents  should  work  only  for  Good  Companies. 

If  this  chapter  has  been  properly  understood,  we 
believe  we  have  made  it  clear  that  the  agents  have  the 
reputation  and  standing  of  the  life  insurance  compa- 
nies in  their  hands.  If  agents  would  never  lend  their 
services  to  companies  of  questionable  reputation,  nor 
to  those  whose  chief  attraction  is.  the  excessive  com- 
missions they  offer,  if  they  would  satisfy  themselves 


74  INSTRUCTION  BOOK 

that  the  men  whom  they  insure  would  never  look  back 
with  regret  to  the  time  when  they  first  listened  to  the 
persuasive  voice  of  the  solicitor,  if  truth,  frankness  and 
honor  always  preceded  the  application,  and  confidence, 
satisfaction  and  good  faith  always  accompanied  the 
policy,  then  a  reform  would  be  begun  which  would  be 
thorough  and  permanent. 

A  company  in  this  country  can  no  more  progress 
without  agents  than  a  general  can  fight  without  sol- 
diers ;  and  if  agents  understood  their  importance  and 
value,  so  as  to  insist  upon  good  companies  or  none,  one 
great  improvement  would  be  accomplished.  Then 
every  choice  of  a  company  would  be  an  emphatic  in- 
dorsement of  its  officers  and  plans,  and  every  rejection 
would  be  an  equally  significant  condemnation  of  them. 
Ever}'  good  agent  should  feel  that  he  has  a  power 
which  has  never  yet  been  used  to  its  full  extent,  and 
which,  properly  directed,  would  be  one  of  the  greatest 
influences  for  good  which  can  be  developed  in  life  in- 
surance. 


FOB  LIFE  AGENTS.  76 


CHAPTER    VIII. 

THE    COMPANY. 

IT  is  highly  important  that  an  agent  should  clearly 
understand  his  relations  with  each  of  the  officers  of  the 
company,  as  a  great  part  of  his  success  depends  upon 
his  obtaining  their  confidence,  and  without  their  aid 
and  co-operation  his  labor  will  be  apt  to  prove  a  failure. 

If  his  field  is  in  the  immediate  vicinity  of  the  home 
office,  he  has  an  opportunity  to  know  them  at  least  by 
reputation,  and  can  judge  somewhat  of  their  ideas  of 
business  ;  if  he  is  stationed  at  a  distance  he  is  usually 
under  the  authority  and  direction  of  a  general  agent  or 
manager  of  agencies.  In  the  latter  case,  the  decisions 
of  the  manager  are  final,  and  he  should  look  to  him  for 
instructions.  What  has  been  said  in  a  previous  chap- 
ter about  being  posted  in  regard  to  his  own  company, 
includes  all  the  knowledge  he  can  avail  himself  of  re- 
specting the  business  qualifications  and  reputation  of 
each  of  its  officers  and  their  general  management. 

The  President  and  Vice-President 

The  president  is  the  highest  authority  in  the  compa- 
ny. Upon  him  devolves  the  decision  of  all  the  more 
important  questions  connected  with  its  management. 
In  many  cases,  however,  the  more  active  control  falls 
upon  the  vice-president,  and  then  all  that  is  here  said 
of  one  is  equally  applicable  to  the  other.  All  questions 
of  contracts,  the  appointment  of  general  agents  or  ma- 
nagers, and  sometimes  of  solicitors,  the  assigning  to 
them  their  special  territory,  the  making  of  purchases 
for  the  company,  the  investment  of  funds,  and  all  the 
more  important  duties,  devolve  upon  him.  This  is  a 
position  of  no  ordinary  importance,  and  it  requires  the 
rarest  executive  ability  and  great  general  information. 
If  the  agent  has  any  business  with  him,  it  should  be 
conducted  with  the  most  cordial  frankness  and  respect; 
the  agent  should  always  desire  to  sustain  the  reputa- 
tion and  add  to  the  prosperity  of  the  company,  and 
should  render  prompt  obedience  to  all  of  its  com- 
mands. The  president,  having  larger  experience  and  a 
general  oversight  of  many  agents,  it  is  to  be  expected 


76  INSTR UOTION  BOOK 

that  his  opportunities  for  judging  of  the  expediency  of 
measures  would  be  superior  to  that  of  solicitors  whose 
observation  is  usually  more  limited.  It  may  be  a  spur 
to  the  ambition  of  agents  to  know  that  the  presidents 
of  some  very  successful  companies  commenced  the 
business  of  life  insurance  as  solicitors,  and  after  getting 
a  thorough  knowledge  of  its  details,  organized  compa- 
nies of  their  own  and  are  conducting  them  on  sound 
business  principles. 

The  Secretary. 

The  secretary  is  the  organ  of  communication  between 
the  company  and  the  outside  public.  It  is  a  part  of  his 
duty  to  prepare  contracts  for  agents,  to  take  charge  of 
the  correspondence  of  the  company,  and  such  details 
as  require  a  constant  supervision.  It  is  highly  import- 
ant that  all  business  matters  which  are  transacted  be- 
tween the  agent  and  the  secretary  should  be  of  a 
friendly  nature.  He  is,  as  it  were,  the  spokesman  of 
the  company  ;  it  issues  its  orders  and  performs  its  offi- 
cial acts  through  him,  and  his  position  is  one  of  re- 
sponsibility and  influence. 

In  corresponding  with  any  of  the  officers  an  agent 
should  be  as  definite  and  explicit  as  possible.  Where  a 
man  has  from  twenty  to  fifty  letters  to  answer  every 
day,  he  is  apt  to  become  impatient  if  his  time  is  taken 
up  in  attending  to  unnecessary  details  of  the  agency,  or 
in  reading  the  opinions  of  an  agent  expressed  in  an  un- 
intelligible manner.  If  a  solicitor  is  immediately  re- 
sponsible to  a  general  manager,  then  all  his  correspond- 
ence should  be  with  him,  unless  it  is  of  such  a  charac- 
ter that  it  needs  the  attention  of  the  home  office.  But 
in  all  cases  the  agent  should  express  his  wants  and 
opinions  with  brevity  and  simplicity. 

The  Medical  Examiner. 

In  the  home  office  of  every  company  a  medical  exam- 
iner is  in  attendance  every  day  to  examine  parties  who 
wish  to  insure.  As  their  examinations  are  conducted  in 
private,  and  reported  immediately  to  the  officers,  the 
agent  has  little  to  do  with  him.  His  duties  being 
strictly  of  a  scientific  nature,  he  does  not  even  know 
who  the  agents  are.  But  when  agents  are  stationed  at 
a  distance  from  the  home  office,  they  have  medical  ex- 
aminers appointed  in  the  towns  where  they  are  located, 
and  often  the  agent  has  something  to  do  in  recommend- 
ing them  to  this  position.  Or.  perhaps,  on  the  agent 


FOR  LIFE  AGENTS.  77 

having  obtained  an  application,  he  goes  to  the  nearest 
regular  doctor  and  gets  him  to  examine  the  applicant. 
The  position  of  a  medical  examiner  in  such  a  case  is  a 
peculiar  one.  He  knows  that  he  is  indebted  to  the 
agent  for  the  fees  of  examination,  and  oil  his  opinion  of 
the  health  of  an  applicant  will  depend  the  commissions 
of  an  agent.  When  this  occurs,  it  may  be  hard  for  him 
to  maintain  a  perfect  independence,  and  to  decide  whe- 
ther to  reject  a  risk  for  which  the  agent  has  labored 
long  and  earnestly,  or  to  state  the  facts  which  he  'is 
confident 'will  lead  to  his  rejection.  But  the  company 
cannot  prosper  unless  the  medical  examiner  is  perfectly 
independent  of  the  agent,  and  decides  all  these  ques- 
tions in  a  disinterested  manner.  The  company  pays 
for  a  strict  and  impartial  examination,  and  is  entitled  to 
it.  What  is  the  agent's  duty  under  such  circumstances? 
He  should  never  attempt  directly  or  indirectly  to  influ- 
ence the  medical  examiner.  He  should  neither  suggest 
certain  replies  nor  question  any  of  his  conclusions.  The 
medical  examiner  should  confine  his  sources  of  know- 
ledge strictly  to  the  application  and  his  personal  inspec- 
tion of  the  candidate  for  insurance.  When  the  applica- 
tion is  completed,  the  agent  has  nothing  more  to  do 
with  it,  as  far  as  the  medical  examiner  is  concerned,  no* 
should  he  receive  any  information  from  the  agent  on  the 
subject  of  the  health  of  the  applicant.  All  interference 
of  this  kind  is  unprofessional. 


The  Manager  of  Agencies. 

The  manager  of  agencies  ought  to  be  a  man  of  great 
business  tact,  experience,  and  an  unblemished  reputa- 
tion. His  knowledge  of  the  practical  working  of  a  life 
insurance  company  should  be  such  that  he  can  decide 
immediately  upon  any  scheme,  proposal  or  plan  of  busi- 
ness within  his  jurisdiction  as  to  whether  it  is  in  har- 
mony with  the  best  interests  of  the  company  or  not.  As 
this  officer  has  usually  a  large  extent  of  territory,  and  is 
expected  to  make  himself  familiar  with  the  wants  and 
the  working  force  in  every  part  of  it,  he  comes  more  in 
contact  with  the  agents  than  any  other  member  of  the 
company.  If  an  agent  needs  any  information,  such  as 
the  advantages  or  disadvantages  of  the  special  features 
of  other  companies,  or  the  best  method  of  operating 
upon  certain  classes  of  individuals,  he  should  apply  to 
the  manager.  It  usually  happens  also  that  the  agent  or 
solicitor  is  directly  responsible  to  him  as  his  employer 
instead  of  the  other  officers  of  the  company.  When 
this  is  the  case,  ah1  that  has  been  said  in  regard  to  the 


78  INSTRUCTION  BOOK 

relations  of  the  agent  with  the  president  or  secretary 
will  apply  here. 

Devotion  to  the  Company. 

An  agent  should  devote  his  whole  services  to  his  own 
company.  He  should  feel  that  its  honor  and  reputation 
are  in  a  great  degree  entrusted  to  his  keeping  and  con- 
nected with  his  interests  ;  that  while  he  is  laboring  to 
increase  its  assets  and  the  number  of  its  policy-holders, 
its  good  name  and  reputation  are  becoming  a  tower  of 
strength  to  him,  and  its  prospects  for  affording  him  a 
more  ample  revenue  are  daily  increasing.  Without  this 
feeling  of  allegiance  he  will  be  almost  sure  to  fail.  Whe- 
ther he  is  at  work  for  a  young  or  an  old  company,  he 
should  always  be  able  to  show  that  there  are  many  qual- 
ities about  it  which  make  one  of  its  policies  a  desirable 
investment,  and  to  do  this  he  should  not  only  have  per- 
fect confidence  in  it,  but  should  master  all  that  is  said 
in  reports  and  charts  about  it. 

His  devotion  should  not  only  be  earnest  but  lasting. 
Having  once  connected  himself  with  a  good  company, 
he  should  not  think  of  changing  without  sufficient  rea- 
sons. If,  after  a  few  months'  trial,  he  is  successful  in 
procuring  new  business,  he  will  probably  have  several 
invitations  to  work  for  other  companies.  Another,  he 
is  told,  pays  higher  commissions  or  has  more  assets,  or 
distributes  a  larger  ratio  of  surplus,  or  has  some  new 
plans  which  are  peculiar  to  it,  and  which  will  procure 
a  vast  amount  of  business .  It  is  natural  for  an  agent 
to  desire  to  improve  his  condition  ;  but  before  he 
yields  to  any  such  entreaty  he  ought  to  ask  himself  se- 
riously and  sincerely  whether  it  is  best  to  make  a 
change.  If  he  has  carefully  complied  with  all  the 
hints  given  in  the  last  chapter  about  choosing  a  com- 
pany, and  has  acted  with  due  deliberation,  there  will 
be  little  or  no  desire  to  change. 

Influence  of  Agents  on  a  Company's  Reputation. 

The  company  is  indebted  to  the  agents  in  a  great 
measure  for  the  reputation  it  has  in  a  community.  It 
is  not  sufficient  to  say  that  the  company  picks  out  its 
own  agents,  who  act  on  their  own  responsibility.  The 
people  will  hold  the  company  responsible  for  their 
conduct.  An  agent  goes  into  a  town,  and  by  misrepre- 
sentation and  deception  succeeds  in  doing  a  large  busi- 
ness for  a  few  months.  After  a  while  the  promises 
which  he  made  in  behalf  of  the  company  are  not  ful- 
filled by  it,  and  the  policy-holders  are  discontented  and 


FOR  LIFE  AGENTS.  79 

let  their  policies  lapse,  or  at  least  they  never  speak 
favorably  of  the  company  they  are  insured  in.  Those 
who  stop  paying  their  premiums  always  have  a  grudge 
against  it  for  sending  out  such  an  agent.  They  look 
upon  him  as  a  proper  representative  of  the  company 
for  whom  he  is  employed. 

It  may  be  that  the  officers  are  partly  responsible  for 
this  state  of  things  ;  perhaps  they  have  not  sufficiently 
cautioned  their  agents  to  avoid  all  misrepresentations 
or  exaggerations  ;  but  this  will  never  excuse  an  agent 
from  feeling  that  the  honor  and  prosperity  of  his  com- 
pany is  inseparably  connected  with  his  own. 

Contracts  •with  the  Company. 

The  contract  which  an  agent  makes  with  a  company 
is  usually  limited  to  a  certain  territory,  and  the  com- 
missions on  all  business  which  he  procures.  "We  shall 
not  attempt  to  give  any  laws  or  to  lay  down  any  infalli- 
ble rules  which  ought  to  regulate  the  payment  of  com- 
missions to  agents.  The  companies  usually  adjust 
them  upon  the  different  classes  of  policies  in  such  a 
manner  as  suits  their  own  ideas  of  propriety. 

The  contract  which  an  agent  makes  should  be  ex- 
plicit and  clearly  understood  by  both  parties.  As  long 
as  it  is  in  force,  the  agent  should  regard  it  as  of  the 
utmost  importance  to  his  reputation  and  success  that 
it  be  complied  with  in  all  its  particulars. 

Commuted  Commissions. 

The  agent's  renewal  commissions  are  his  own  prop- 
erty, subject  to  the  terms  of  the  contract  by  which  he 
accepted  the  agency.  It  often  happens  that  an  agent 
wants  to  sell  out  his  right  in  the  future  profits  of  his 
business,  and  the  question  arises,  what  is  their  present 
value,  or  how  shall  their  present  value  be  ascertained  ? 
If  it  were  certain  that  there  would  be  no  lapses  or  sur- 
rendered policies,  the  present  value  of  the  future  com- 
missions could  be  arrived  at  very  easily.  But  at  present 
nothing  in  life  insurance  is  more  uncertain.  There  are 
many  different  things  to  be  examined  in  determining 
their  approximate  value.  If  the  company  is  one  in 
which  the  policy-holders  have  perfect  confidence,  then 
the  policies  will  be  more  likely  to  be  kept  in  force 
than  if  the  reputation  of  the  company,  or  some  of  its 
methods  of  doing  business,  were  not  so  satisfactory. 
If  most  of  the  policies  have  been  in  force  several  years, 
and  the  premiums  have  been  regularly  paid,  then  their 


80  INS TR UOTION  BOOK 

future  continuance  is  highly  probable.  If  the  general 
character  of  the  agent  is  good,  and  his  business  has 
been  honorably  maintained  among  reliable  men,  then 
these  circumstances  should  be  considered  in  the  agent's 
favor.  Moreover,  it  should  be  taken  into  consideration 
that  one  is  much  more  apt  to  keep  up  his  renewals  if 
the  agent  who  insured  him  calls  on  him  for  their  collec- 
tion than  if  they  are  to  be  sent  to  the  central  office  by 
mail. 

No  definite  rules  can  be  given  for  determining  the 
value  of  this  species  of  property,  and  companies  can- 
not make  very  liberal  terms  with  agents  because  of  the 
uncertainty  whether  these  premiums  will  continue  to 
be  paid.  The  best  terms  which  an  agent  may  expect 
to  get  is  the  present  value  of  them  for  a  few  years,  as 
the  case  may  be. 


FOR  LIFE  AGENTS.  81 


CHAPTER  IX. 

THE    AGENCY. 
The  Field. 

IF  the  agent  is  commencing  the  business  of  soliciting 
he  will  find  it  advantageous  to  begin  his  labors  where 
he  has  a  number  of  acquaintances  and  personal  friends. 
They  will  listen  the  more  readily  to  him  and  be  more 
favorably  impressed  toward  his  company,  and  he  will 
be  far  more  likely  to  take  applications  among  them  at 
the  outset  than  among  total  strangers.  His  personal 
friends  will  assist  him  in  making  new  acquaintances 
and  in  informing  him  of  those  who  would  be  likely  to 
insure. 

It  is  a  great  mistake  for  an  agent  to  suppose  that  he 
needs  a  large  field  for  his  exclusive  jurisdiction.  An 
agent  in  laying  out  too  much  work  for  himself  is  apt  to 
end  in  accomplishing  little.  In  every  thickly-settled 
community  or  large  town,  there  are  a  great  number  of 
people  who  are  not  insured,  and  who  only  need  to  be 
convinced  in  its  favor.  It  is  not  the  extent  of  territory 
worked  over,  but  the  number  of  applications,  which 
makes  the  agent's  record.  When  an  agent  has  once 
commenced  in  a  place,  and  is  doing  well,  he  should  re- 
main there  as  long  as  he  is  successful.  His  territory 
can  be  enlarged  as  he  shows  capacity  to  work  ic.  But 
if  a  solicitor  commences  by  monopolizing  a  large  field 
at  the  outset,  the  company  is  apt  to  expect  more  than 
he  can  accomplish.  In  attempting  to  do  too  much 
he  does  nothing  thoroughly,  and  in  the  meantime  he 
is  incurring  considerable  expense  in  traveling.  It  is 
like  cultivating  a  large  farm  with  insufficient  help,  and1 
consequently  the  harvest  is  small. 

It  is  equally  a  mistake  for  a  solicitor  to  suppose  that  he 
must  have  a  field  which  is  new,  or  where  the  subject  of  life 
insurance  has  been  little  talked  about.  In  such  a  field 
he  will  find  the  people  strangers  to  life  insurance,  and 
consequently  harder  to  convince  than  if  some  agent  had 
already  insured  some  of  the  principal  citizens.  If  an 
agent  can  say  "  Here  is  Mr.  A.  and  Mr.  B.,  prominent 
men  in  this  place,  and  men  of  good  business  capacity, 
who  would  not  spend  money  foolishly,  they  have  their 


82  INSTR UCTION  BOOK 

lives  insured  to  a  heavy  amount,"  it  will  go  far  toward 
convincing  a  skeptic  of  its  importance.  There  is  no 
place  in  the  country  where  all  the  people  are  insured 
who  can  pass  examination  and  who  can  pay  annual  pre- 
miums on  a  respectable  sum,  and  while  this  state  of 
things  exists,  there  is  room  for  one  more  agent. 

His  Headquarters. 

An  agent  should  have  his  office  or  headquarters  in 
some  prominent  town  or  place  where  there  are  wealthy 
men  whose  influence  he  can  rely  upon  in  advocating 
the  claims  of  his  company.  In  a  thickly-settled  town 
or  city  he  can  see  twice  as  many  people  in  a  day  as  in 
the  country,  and  he  can  make  himself  better  known  to 
them  in  a  shorter  time.  In  such  a  place  he  will  find  it 
easier  to  start  a  business.  Men  in  active  life,  who  see 
considerable  of  the  world,  and  who  have  an  opportuni- 
ty of  knowing  something  of  the  practical  benefits  of 
life  insurance,  are  more  apt  to  insure  than  those  whose 
circumstances  and  pursuits  are  less  prominent. 

Insuring  Certain  Classes. 

Some  agents  who  operate  in  large  cities  make  a 
specialty  of  insuring  men  in  certain  kinds  of  busi- 
ness and  professions.  There  is  an  advantage  in  this 
which  is  worth  consideration.  When  the  agent  is  well 
acquainted  with  men  in  any  profession,  he  understands 
their  general  habits,  he  knows  when  they  are  most  ac- 
cessible, and  what  arguments  will  influence 'them  most; 
by  making  this  a  study  he  can  get  into  their  confidence 
more  easily  ;  he  can  say,  "  I  have  just  insured  Mr.  So- 
and-so,  whom  you  know,  and  who  is  in  the  same  ousi- 
ness  you  are."  When  an  agent  gets  into  a  groove  of 
this  kind,  insuring  lawyers,  brokers,  or  any  class  of 
business  men,  he  has  an  advantage  over  those  agents 
who  attempt  to  take  all  classes  in  their  nets. 

Should  build  on  a  Solid  Foundation. 

Whatever  is  worth  doing  at  all,  is  worth  doing  well. 

In  commencing  his  work,  the  agent  should  bear  in 
mind  that  it  is  of  the  greatest  importance  to  begin 
right,  and  then  it  will  be  easy  to  remain  so.  He  should 
take  no  steps  he  will  have  to  retrace,  nor  begin  any  work 
which  he  will  have  to  undo.  In  building  the  East  Ri- 
ver Bridge,  the  foundations  of  the  piers  were  laid  oc 
the  solid  rock,  because  the  structure  is  expected  to  last 


FOR  LIFE  AGENTS.  83 

for  all  time;  so  in  establishing  an  agency,  the  agent 
should  regard  it  as  his  life  work,  and  act  accordingly. 
It  is  like  clearing  a  farm  in  a  Western  wilderness;  when 
the  trees  and  stumps  are  removed,  and  the  ground 
brought  into  a  high  state  of  cultivation,  the  farmer  can 
depend  upon  it  for  an  adequate  support  as  long  as  he 
lives. 

An  agent  is  laboring  for  the  future;  if  successful,  his 
renewals  will  afford  him  a  constant  income,  and  if  he  is 
careful  in  selecting  his  risks  and  retains  the  confidence 
of  the  company,  his  reward  is  sure.  If  he  has  careful- 
ly followed  the  precepts  given  in  the  preceding  chap- 
ters, he  has  done  much  toward  future  success  ;  and  for 
his  encouragement  hereafter,  let  him  ever  remember 
that  the  best  companies  and  the  most  successful  agen- 
cies, are  those  which  were  begun  right  and  conducted 
with  unremitting  energy  and  correct  methods. 

Securing  the  Influence  of  Prominent  Men. 

One  of  the  most  important  things  connected  with 
an  agency  is  to  secure  the  influence  and  goodwill  of 
prominent  men  in  the  vicinity  where  the  agent  is  going 
to  work.  Some  companies  dopt  this  principle  on  a 
large  scale.  When  they  go  into  a  new  State,  they  se- 
lect some  of  the  most  prominent  men  for  a  "  Board  of 
Reference."  It  is  understood  that  these  men  have  ex- 
amined the  affairs  of  the  company,  or  are  BO  thoroughly 
acquainted  with  it  that  they  are  competent  to  give  a 
correct  opinion  of  its  soundness  and  the  standing  of  its 
officers.  Without  going  into  a  discussion  of  the  "local 
board  plan  "  as  such,  it  is  safe  to  say  that  men  who 
would  never  think  of  insuring  under  other  circum- 
stances, will  give  an  agent  a  patient  hearing  if  his  com- 
pany is  indorsed  by  some  prominent  men  in  whose  opin- 
ions he  has  confidence. 

In  coming  into  a  town  where  an  agent  is  not  known, 
one  of  the  first  things  he  should  do  is  to  get  a  list  of  the 
leading  citizens  who  are  good  risks,  and  insure  as  many 
of  them  as  possible.  Some  of  them  may  be  acquainted 
with  his  company,  or  may  be  personally  known  to  some 
of  the  officers,  and  this  will  aid  him  materially.  There 
are  many  men  who  will  not  look  at  an  insurance  leaflet, 
or  think  of  taking  a  policy,  until  they  are  told  that 
Squire  A.  or  Kev.  B.  or  Dr.  C.  has  his  life  insured. 
Most  men  are  so  constituted  that  they  like  to  have  their 
thinking  done  for  them.  When  some  one  else  in  whom 
they  have  perfect  confidence  has  taken  a  policy,  they 
are  ready  to  do  the  same. 


84  IN8TR  UGTION  SO  OK 

The  minister  in  every  parish  has  a  great  influence 
over  his  flock,  and  if  he  can  be  persuaded  to  insure,  a 
strong  point  will  be  gained,  since  he  knows  all  the  influ- 
ential men  in  his  congregation  or  parish,  and  can  give 
the  agent  valuable  assistance  in  pointing  out  those  who 
would  be  likely  to  take  a  policy.  It  is  also  a  good  idea 
to  persuade  the  leading  members  of  a  church  or  con- 
gregation to  present  their  minister  with  a  life  insurance 
policy,  and  with  it  a  pledge  to  keep  the  premiums  paid 
during  his  stay  among  them.  Apart  from  the  good 
such  an  act  might  do  the  agent,  it  is  a  simple  duty 
which  all  parishes  owe  to  their  spiritual  guides  if  they 
are  faithful  and  deserving.  Is  there  any  present  more 
acceptable  than  a  life  policy,  or  an  endowment  maturing 
at  the  age  of  sixty-five  or  seventy  ?  If  an  agent  can 
persuade  a  minister  to  insure,  or  his  church  to  insure 
him,  both  the  agent  and  his  company  will  be  tolerably 
well  advertised  by  the  operation. 

Owners  of  factories  and  foremen  in  large  manufactur- 
ing establishments  should  be  objects  of  special  atten- 
tion. A  policy  from  one  of  this  class  will  go  a  great 
way  toward  introducing  the  agent  to  the  favorable  no- 
tice of  the  workmen,  and  when  they  once  hear  that 
their  "boss "is  insured,  they  will  have  little  or  no 
doubt  but  the  company  is  a  safe  and  prosperous  one. 
The  same  rule  will  apply  to  many  other  organizations. 
If  the  agent  belongs  to  any  society,  lodge,  or  military 
company,  he  should  lose  no  time  in  insuring  as  many 
of  the  influential  members  in  it  as  possible. 

This  idea  of  using  certain  kinds  of  machinery,  such 
as  the  corporations  or  organizations  which  we  have  just 
described,  is  one  of  the  most  important  points  in  solic- 
iting. It  should  be  the  constant  question  on  the  mind 
of  every  agent,  ' '  How  can  I  use  this  influence  or  that 
organization  in  building  up  my  business  ?"  Nothing 
should  be  left  untried  which  hns  a  fair  show  of  success 
— no  honorable  means  should  be  neglected  to  increase 
the  business  of  the  company  and  to  get  himself  in  the 
way  of  taking  important  risks.  There  is  as  much  room 
for  strategy  in  soliciting  life  insurance  as  there  is  in  mil- 
itary operations  ;  there  are  campaigns  to  plan,  and 
there  are  victories  to  win  in  both.  As  he  is  the  most 
successful  general  who  unites  boldness  and  vigor  to  the 
application  of  every  scientific  discovery  which  can  be 
used  in  war,  so  is  he  the  most  successful  agent  who  can 
make  all  the  different  human  agencies  subserve  to  in- 
crease his  business  and  the  reputation  of  his  company. 

The  medical  examiner  in  any  town  or  city  can  give 
an  agent  a  great  amount  of  valuable  information  about 


FOR  LIFE  AGENTS.  85 

men — who  are  the  best  risks  and  who  would  be  likely 
to  insure.  His  professional  knowledge  will  enable  him 
to  tell  the  agent  when  is  the  best  time  to  see  certain 
parties,  what  kind  of  men  they  are  to  approach,  or 
wnat  arguments  would  be  likely  to  prevail  with  them. 


Other  Events. 

An  agent  should  take  advantage  of  every  event  which 
btis  a  tendency  to  bring  the  subject  of  life  insurance 
before  the  public.  If  a  man  dies  in  the  place  where  he 
is  soliciting,  and  is  heavily  insured,  the  agent  should 
make  this  a  special  argument  in  favor  of  life  insurance, 
he  should  find  out  how  large  a  policy  he  had,  how 
many  premiums  he  had  paid,  and  their  aggregate 
amount,  and  then  he  can  go  before  the  public  and  say, 
"Here  is  an  instance  where  a  man  paid  only  a  few 
hundred  dollars,  and  his  widow  has  now  several  thou- 
sand paid  to  her  by  the  company.  Here  is  a  practical 
illustration  of  the  business  worth  of  life  insurance.  If 
she  had  received  this  amount  from  a  rich  uncle  whom 
she  had  never  seen,  everybody  would  have  said,  '  How 
lucky  she  has  been  !'  "  If  a  man  dies  without  any  in- 
surance on  his  life,  the  agent  can  say,  ' '  That  man 
could  have  been  insured  a  year  ago  for  $5,000  by  pay- 
ing only  one  or  two  hundred  dollars  ;  but  he  thought 
life  insurance  was  a  humbug,  and  see  how  his  affairs 
are  left,  and  how  his  family  will  be  situated  in  the  fu- 
ture." 

If  an  agent  discovers  that  a  gentleman  or  any  of  his 
Family  are  going  on  a  voyage  to  Europe,  or  any  distant 
jountry,  he  should  lose  no  time  in  offering  to  insure 
their  lives,  and  should  urge  the  importance  of  protect- 
ing each  other  by  insurance.  Most  people  look  upon  a 
voyage  at  sea,  and  travel  in  a  distant  country  for  the 
first  time,  at  least  as  fraught  with  no  little  danger,  and 
they  should  be  more  willing  to  insure  than  ever  before. 

Other  family  events  have  some  influence  :  the  birth 
of  a  son  or  daughter  may  be  the  occasion  of  a  father's 
taking  an  endowment  policy  payable  when  the  child  is 
of  age.  A  man  just  married  may  sometimes  be  induced 
to  take  a  policy  in  favor  of  his  wife,  especially  if  he  is 
entirely  dependent  upon  his  own  income  or  salary  for 
their  support. 

Advertising. 

An  agent  should  take  every  suitable  opportunity  to 
make  himself  known,  and  the  company  he  represents 


B6  INSTRUCTION  BOOK 

should  also  be  kept  prominently  before  the  public.  In 
some  companies  the  whole  business  of  advertising  is 
placed  in  charge  of  one  of  the  officers  or  employees, 
who  selects  such  channels  and  takes  such  measures  as 
he  thinks  proper.  But  whatever  the  agent  is  allowed 
to  do  by  means  of  handbills,  show-cards  hung  up  in 
hotels  and  public  places,  advertisements  snd  editorial 
notices  in  the  local  papers,  should  be  diligently  attend- 
ed to.  In  most  places  of  public  resort  a  handsome 
show-card  is  always  welcome,  and  people  looking  at  it 
merely  to  admire  its  beauty  will  get  some  idea  of  the 
company.  Nothing  of  this  kind  should  be  despised. 
It  is  rather  mortifying  for  an  agent  to  be  asked,  "  Where 
is  your  company  located  ?  I  never  heard  of  it  before." 
But  if  the  company  has  been  well  advertised  by  the 
means  which  have  been  suggested,  this  misfortune  will 
not  be  likely  to  occur.  A  great  deal  of  money  which 
is  spent  in  advertising  is  utterly  wasted.  As  a  general 
rule,  a  short  local  notice  which  will  attract  the  eye  and 
fasten  the  attention  of  the  reader  upon  one  or  two  facts 
is  the  most  effectual  method.  It  is  more  apt  to  be 
read  and  remembered  than  a  half  column  displayed 
advertisement.  But  while  all  these  things  are  useful 
as  aids  in  obtaining  business,  no  reliance  should  be 
placed  upon  them,  without  personal  effort  and  active 
canvassing.  Printers'  ink,  unaided,  will  not  bring  in 
the  applications.  The  public  is  not  yet  educated  up 
to  that  standard. 

Excelsior. 

Finally,  every  agent  should  endeavor  to  make  his 
agency  as  profitable  and  respectable  as  possible.  He 
should  look  upon  it  as  a  man  looks  upon  his  farm  or 
his  factory.  It  is  his  means  of  livelihood,  and  the 
money  and  labor  he  spends  upon  it  is  so  much  capital 
invested.  He  should  not  only  bring  it  up  to  a  high 
state  of  cultivation,  but  should  make  it  an  ornament  to 
the  place  in  which  he  lives.  In  like  manner  an  agent 
should  take  a  pride  in  having  the  best  agency  and  the 
best  selection  of  risks  in  the  place  where  he  is  located. 
In  everything  which  is  praiseworthy  he  should  strive 
to  excel  all  his  competitors.  This  should  be  his  firm 
resolve.  No  spasmodic  effort,  no  temporary  measure 
will  produce  this  result.  It  cannot  be  done  in  a 
single  day  or  a  single  year,  and  the  agent  should 
take  hold  of  it  with  the  determination  to  make 
it  his  life  work.  It  is  a  great  mistake  for  an  agent  to 
suppose  that  he  can  work  in  one  company  a  year,  and 
the  next  year  transfer  all  his  business  to  another,  and 


FOE  LIFE  AGENTS.  87 

get  rich  by  such  a  system  of  changes.  That  is  not  the 
way  in  which  the  great  fortunes  in  life  insurance  have 
been  made,  or  by  which  the  great  agencies  have  been 
built  up. 

The  Ultimate  Record. 

Before  concluding  this  chapter  it  may  be  well  to 
show  to  the  young  aspiring  agent  that  there  are  prizes 
to  be  won  in  the  life  insurance  tournament,  as  well  as 
battles  to  be  fought  which  the  outside  public  knows 
little  about.  We  should  not  be  justified  in  setting 
forth  the  duties,  the  sacrifices,  and  the  labors  of  an 
agent  without  likewise  giving  some  faint  glimpse  of 
what  has  been  and  what  can  be  done  by  those  who 
have  shown  themselves  worthy.  Some  of  the  most 
profitable  general  agencies  of  our  leading  companies 
yield  a  revenue  of  from  $10,000  to  $30,000  per  annum, 
and  nearly  all  of  this  is  from  renewal  commissions. 
The  income  has  been  honestly  earned,  and  the  business 
has  been  built  up  by  the  hard  toil  of  years  of  soliciting 
and  the  successful  management  of  subordinate  agents. 

There  is  no  business  more  honorable  when  rightly 
managed,  nor  is  there  any  more  sure  of  reward  for  one's 
labor,  than  a  successful  life  insurance  agency. 


88  fNS  TR  UCTION  SO  OK 


CHAPTER    X. 

ACCOUNTS    WITH    THE    COMPANY. 
Monthly  Statements. 

A  GOOD  agent  will  be  careful  to  keep  accurate  ac- 
counts of  all  the  business  transacted,  premiums  re- 
ceived, and  expense  incurred  in  his  agency.  In  order 
to  do  this  successfully  he  should  be  a  man  of  correct 
business  habits,  and  have  some  practical  knowledge  of 
bookkeeping.  The  company  furnishes  him  with  blanks 
to  make  up  his  monthly  statements  of  new  policies  is- 
sued during  the  month,  the  renewals  falling  due,  toge- 
ther with  those  held  over  from  the  previous  month  for 
want  of  payment.  It  is  of  great  importance  that  this 
statement  should  be  correctly  prepared,  and  that  all 
the  accounts  should  be  made  to  balance.  The  sum  of 
the  premiums  on  renewals  and  policies  returned  and 
those  on  hand,  together  with  the  expenses  charged  and 
cash  remitted,  should  equal  the  total  amount  of  premi- 
ums charged  in  the  account.  Whenever  any  policy  or 
renewal  has  been  retained  in  the,  hands  of  the  agent  as 
long  as  the  rules  of  the  company  allow,  vithout  the 
premium  being  paid,  it  should  be  promptly  returned  to 
the  company  for  their  disposal. 

Office  Books,  etc. 

An  agent  should  have  a  register  of  all  the  policies 
taken  at  his  agency,  and  this  book  should  be  so  ruled 
and  arranged  that  it  will  show  the  number,  date,  pre- 
miums, commissions,  etc.,  of  each  policy  taken,  and 
give  a  general  epitome  of  all  the  business  done.  It  is 
a  very  important  adjunct  to  the  office,  as  it  enables  the 
agent  to  tell  what  premiums  are  falling  due  each  month, 
so  that  he  can  send  notices  to  the  policy-holders  a  suffi- 
cient number  of  days  in  advance,  and  also  when  to  re- 
turn policies  not  taken  or  renewals  on  policies  which 
have  lapsed.  He  should  also  keep  an  expense  book  in 
which  all  the  company  expenses  at  his  agency  are  noted, 
such  as  medical  examinations,  traveling  arid  office  ex- 
penses, etc.,  and  vouchers  for  all  expenses  incurred 
should  be  taken  if  required  by  the  company . 


FOR  LIFE  AGENTS.  89 

He  should  also  keep  a  supply  book  in  which  he  re- 
cords all  the  supplies  received  and  the  disposition  made 
of  them.  All  the  letters  and  correspondence  relating 
to  his  business  which  he  receives  from  the  company  or 
other  parties  should  be  carefully  indorsed  and  filed.  As 
these  books  are  the  property  of  the  company,  they 
should  be  open  to  the  inspection  of  the  officers  when- 
ever they  are  demanded. 

In  writing  to  the  home  office  respecting  any  particu- 
lar policy,  the  number  of  the  policy  should  always  be 
given  in  preference  to  the  name  of  the  policy-holder,  and 
all  references  to  different  policies  should  be  made  in 
this  manner.  A  strict  adherence  to  this  rule  will  save 
an  immense  deal  of  labor  on  the  part  of  the  clerks  in 
the  home  office. 

Careless  Agents. 

Some  agents  have  such  loose  business  habits  that  they 
seldom  or  never  prepare  a  monthly  statement  correctly, 
and  when  it  is  sent  to  the  home  office,  the  mistakes  or  dis- 
crepancies are  discovered,  and  the  secretary  has  to  re- 
turn it  for  correction  or  write  for  explanations,  and  a 
whole  month  or  more  elapses  before  it  is  rectified. 

When  the  president  or  some  of  the  officers  of  the 
company  visits  such  an  agent,  everything  is  in  confu- 
sion; he  does  not  know  how  his  accounts  stand,  he  is 
doing  such  a  business  that  he  has  not  had  time  to  at- 
tend to  these  trivial  matters,  and  the  consequence  is, 
that  several  days  must  be  employed  in  going  over  his 
accounts  and  putting  them  in  order.  This  trouble  and 
confusion  is  entirely  unnecessary.  The  time  of  the  of- 
ficers of  the  company  is  extremely  valuable,  and  it  is 
putting  the  company  to  an  unnecessary  expense  which 
a  little  attention  and  correct  bookkeeping  would  have 
saved.  An  agent's  reputation  as  a  man  of  business  de- 
pends a  great  deal  on  such  things  as  these.  If  he  is 
so  much  engrossed  in  getting  new  business  that  he  can- 
not keep  his  accounts  straight,  or  has  not  sufficient 
knowledge  of  bookkeeping  and  has  no  time  to  acquire 
it,  he  should  employ  a  competent  clerk  to  do  it  for  him. 


90  INSTRUCTION  SO  OK 


CHAPTER   XI. 

SOLICITING. 

IN  this  chapter  we  propose  to  give  some  general  ideas 
of  soliciting,  and  as  many  particular  ones  as  may  be 
deemed  expedient.  But  in  giving  these  directions  and 
precepts,  we  wish  it  to  be  understood  by  the  reader  that 
we  do  not  warrant  them  to  apply  to  every  case  which  a 
solicitor  may  have,  nor  do  we  think  it  is  possible  to 
present  any  infallible  rules  or  specific  arguments  for  so- 
liciting, any  more  than  it  is  to  give  infallible  directions 
how  to  make  a  fortune  by  speculating  in  Wall  Street. 
Men  are  so  different  in  their  circumstances,  their  hab- 
its of  thinking  and  acting,  that  seldom  can  any  two  be 
•won  over  by  the  same  arguments.  Soliciting  is  a  busi- 
ness which  must  be  conducted  entirely  according  to 
the  circumstances  of  the  case,  and  the  agent  must  be 
the  sole  judge  of  the  propriety  of  the  means  to  be 
used  ;  and  whatever  directions  and  arguments  are  here 
given,  are  meant  to  be  employed  when  the  circum- 
stances are  such  as  to  justify  their  use,  and  not  other- 
wise. 

If  a  doctor  knows  the  properties  of  a  hundred  differ- 
ent kinds  of  medicine,  and  their  effect  on  the  human 
system,  this  knowledge  is  of  no  use  to  him  in  any  par- 
ticular case,  unless  he  knows  with  what  disease  the  pa- 
tient is  afflicted.  If  the  patient  has  the  smallpox  it  is 
useless  to  prescribe  medicine  suitable  for  the  typhus  fe- 
ver. If  the  doctor  comes  to  his  bedside,  and  without 
looking  at  him  says  to  himself,  "  I  have  a  hundred  dif- 
ferent kinds  of  medicine,  every  one  of  which  is  a  spe- 
cific against  some  disease,  and  of  course  I  can  cure 
this,  therefore  it  is  of  no  use  for  me  to  feel  of  his  pulse, 
or  to  look  at  his  tongue,  or  to  learn  any  of  his  symp- 
toms— if  one  medicine  does  not  produce  the  desired 
effect,  another  will,  and  I  have  only  to  experiment  on 
him  till  he  gets  well  " — would  such  a  doctor  be  a  very 
successful  practitioner  ?  No.  That  is  not  the  way  a 
physician  goes  to  work.  He  makes  a  careful  examina- 
tion of  all  the  external  indications  of  disease,  asks  him 
a  few  simple  leading  questions  about  his  symptoms, 


FOR  LIFE  AGENTS.  91 

and  in  a  short  time  he  has  satisfied  himself  what  is  the 
ailment  and  what  remedies  are  needed. 

In  the  same  way  an  agent  should  find  out  as  nearly  ns 
he  can  what  arguments  he  will  have  to  produce  and 
what  objections  he  will  havo  to  meet  before  he  asks  a 
man  to  insure.  He  should  learn  as  nearly  as  possible 
what  his  means  are,  and  how  much  he  can  probably  af- 
ford to  pay  on  a  policy.  It  should  be  done  before  the  man 
is  asked  to  insure  for  any  particular  amount  or  on  any 
definite  plan.  If  the  agent  suggests  too  large  a  premi- 
um he  will  frighten  him  away  if  too  small,  the  agent 
does  a  large  amount  of  work  gratuitously.  He  should 
learn,  if  possible,  his  age,  so  that  he  can  tell  precisely 
how  much  premium  will  be  required.  If  the  party  is 
already  insured,  the  agent  would  do  well  to  find  out  in 
what  company,  and  if  the  policy-holder  is  satisfied  with 
the  bargain,  he  should  show  the  resemblance  between 
that  company  and  his  own,  and  any  circumstances  of 
superiority  can  be  pointed  out  ;  care  should  be  taken 
to  keep  him  satisfied  with  what  insurance  he  has,  to  in- 
duce him  to  take  more. 

If  he  is  a  careful,  cautious  man,  one  who  builds  en- 
tirely for  the  future,  then  the  agent  may  explain  how  a 
policy  in  a  responsible  life  insurance  company  is  ex- 
actly suited  to  his  wants  ;  that  the  payment  of  policy 
claims  and  the  stability  of  life  insurance  companies  are 
as  certain  as  any  corporations. 

In  some  way  or  other  almost  every  man  can  be 
reached  by  arguments  in  favor  of  life  insurance.  Some 
are  so  easily  pleased  with  the  idea  that  they  are  making 
certain  provision  for  their  families,  that  they  will  readi- 
ly insure  for  a  large  amount;  others  must  see  money  in 
it,  and  will  not  take  a  policy  unless  they  are  sure  of  get- 
ting the  best  of  the  bargain  ;  others,  still,  will  insure 
because  some  one  .else  has,  and  these  peculiar  reasons, 
motives  or  inferences  which  lead  men  to  insure,  cannot 
be  seen  at  a  glance,  but  have  to  be  discovered  by  dili- 
gent inquiry  and  cautious  observation. 

Introductions. 

Among  a  certain  class,  especially  prominent  business 
men,  in  our  large  cities,  an  introduction  either  in  person 
or  by  letter  is  often  necessary  to  produce  a  proper  impres- 
sion and  to  induce  them  to  give  the  subject  that  degree  of 
thought  which  is  required  to  secure  an  application.  An 
introduction  is  a  virtual  pledge  made  by  the  party  pre- 
senting the  stranger,  that  the  latter  is  a  person  worthy 
of  confidence,  and  it  also  carries  with  it  an  obligation  on 


92  INSTRUCTION  BOOK 

the  part  of  him  to  whom  the  man  is  introduced  to  lis- 
ten respectfully  to  what  he  has  to  say.  When  an  agent 
comes  as  a  perfect  stranger  to  a  man  and  asks  him  to 
insure,  the  latter  must  be  convinced  that  he  is  worthy 
of  confidence,  and  that  the  company  he  represents  is 
entirely  trustworthy.  There  is  no  method  of  doing 
this  so  quickly  as  by  having  an  introduction  from  an  in- 
fluential friend.  Substitutes  for  this  may  be  adopted, 
such  as  circular  letters  signed  by  influential  citizens 
who  have  obtained  insurance,  or  others  well  known  for 
their  reputation.  The  end  which  the  agent  seeks  to  ac- 
complish is  to  make  himself  favorably  known  to  the 
public  or  to  particular  individuals,  and  to  bring  his  com- 
pany into  notice,  and  any  honorable  method  which  sug- 
gests itself  to  him  should  be  tried. 

A  Suitable  Opportunity. 

This  is  an  important  point  in  soliciting.  It  will  do 
no  good  to  go  a  trout  fishing  when  the  streams  are  cov- 
ered with  ice,  nor  to  hunt  wild  ducks  around  the  north- 
ern lakes  in  midwinter.  There  is  a  certain  time  and 
place  most  suitable  for  accomplishing  everything,  espe- 
cially in  life  insurance.  A  commercial  traveler  knows 
that  there  is  a  certain  time  in  the  year  when  spring 
styles  of  goods  will  sell,  and  a  time  when  only  the  fall 
and  winter  styles  will  be  looked  at.  It  is  somewhat  so 
in  insurance.  If  a  farmer  has  just  sold  his  crops,  if  a 
merchant  is  doing  a  thriving  business,  or  if  a  broker 
has  just  made  a  fortune  by  speculating  in  stocks,  then 
here  is  an  opportunity  for  the  life  agent  which  is  too 
good  to  be  lost.  Let  the  agent  look  after  these  men 
without  delay.  Let  him  select  such  hours  of  the  day 
when  he  can  call  upon  them  without  putting  them  to 
inconvenience,  and  then  present  the  claims  of  life  in- 
surance as  earnestly  as  the  nature  of  the  case  will  allow. 
Under  all  circumstances  the  conduct  of  the  agent  should 
depend  upon  his  innate  sense  of  propriety,  and  the 
greatest  care  should  be  taken  not  to  say  or  do  anything 
which  will  repel  a  man  from  taking  a  favorable  view  of 
the  subject. 

Stating  the  Business. 

In  soliciting  insurance  the  agent  should  always  bear  in 
mind  that  he  has  an  article  for  sale,  which  in  all  probabili- 
ty the  man  really  needs  but  does  not  desire,  and  his 
first  business  and  perhaps  the  whole  of  it  is  to  convince 
him  that  he  does  need  it.  To  commence  talking  about 


FOR  LIFE  AGENTS.  93 

any  particular  company,  or  new  plan  of  insurance,  is  to 
begin  at  the  wrong  end.  It  takes  for  granted  that  the 
man  wants  insurance,  but  does  not  know  where  to  find 
it  or  what  kind,  which  is  not  very  complimentary  to  his 
self-esteem.  Life  insurance  as  insurance,  and  not  as 
an  investment  or  a  speculation,  should  be  clearly  pre- 
sented ;  its  great  claims  upon  the  public,  and  especial- 
ly upon  individuals  who  have  families  dependent  upon 
them,  and  whose  death  would  leave  them  without  ade- 
quate support,  should  be  forcibly  urged,  with  a  due  re- 
gard to  the  circumstances  of  the  individual  and  with 
perfect  fidelity  to  the  company.  All  information  asked 
should  be  correctly  given,  for  any  questions  will  show 
that  the  listener  is  taking  an  interest  in  the  subject,  and 
all  necessary  explanations  should  be  made,  care  being 
taken  to  go  as  little  as  possible  into  the  technical  part 
of  the  subject,  unless  the  education  and  mental  qualifi- 
cations of  the  man  are  such  that  these  things  are  inter- 
esting to  him.  Clearness  and  simplicity  of  diction  and 
a  quiet  earnestness  of  manner  are  qualities  most  effect- 
ive in  producing  conviction. 

Arguments  should  be  adapted  to  his  Condition. 

All  arguments,  appeals  and  illustrations  should  be 
adapted  to  the  condition  of  the  man  the  agent  wishes 
to  insure.  It  is  folly  to  urge  the  same  arguments  upon 
a  plain  farmer  which  would  be  effectual  with  a  wealthy 
merchant  or  prosperous  banker,  and  vice  versa.  The 
former  may  want  insurance  at  its  cheapest  rate,  and  is 
satisfied  with  that  form  which  gives  the  greatest  possi- 
ble insurance  with  the  least  expenditure  of  money, 
while  the  latter,  taking  a  business  view  of  the  case,  may 
think  of  taking  a  policy  simply  as  an  investment. 

There  is  hardly  any  subject  or  characteristic  of  life 
insurance  which  cannot  be  reasonably  and  clearly  illus- 
trated by  fire  insurance,  and  this  is  one  of  the  easiest 
methods  of  meeting  some  of  the  common  objections 
urged  against  it.  If  a  party  complains  that  the  ex- 
penses of  life  companies  are  too  great  for  the  premiums 
paid,  the  agent  can  reply  that  the  average  expense  of 
fire  companies  is  thirty  per  cent.,  the  dividends  to 
stockholders  is  ten  per  cent.,  and  only  sixty  percent,  of 
the  premium  is  usually  taken  to  pay  the  current  losses 
during  the  year.  If  a  man  cannot  understand  why  a 
company  should  require  a  premium  larger  than  the  an- 
nual cost  of  insurance  and  necessary  expenses,  the 
agent  can  state  the  matter  as  follows  :  Suppose  a 
house  is  erected  on  a  vacant  lot  far  from  any  other 


94  INBTB  UCTION  B  0  OK 

dwellings,  and  is  insured  against  fire  for  ten  years.  At 
the  end  of  one  year  a  factory  is  set  up  on  one  side  of  it, 
a  year  or  two  after  a  mill  is  placed  on  another  side,  and 
in  a  short  time  the  vicinity  is  built  up  with  wooden 
buildings  to  such  an  extent  that  it  is  almost  certain  that 
the  house  will  be  consumed  in  a  few  years.  Now  if  the 
owner  of  the  house  wants  a  uniform  rate  of  premium 
during  these  years  of  increasing  risk,  then  the  premium 
of  the  first  few  years  must  be  larger  than  is  sufficient  to 
carry  the  annual  risk,  in  order  to  provide  for  the  in- 
creased danger  which  is  to  come,  and  the  company  must 
set  aside  a  sum  each  year  which  will  be  sufficient  to 
save  the  company  from  loss,  and  pay  the  current  ex- 
penses. In  an  insured  life,  the  danger  of  death  or  loss 
to  the  company  increases  every  year.  According  to  the 
tables  it  is  considered  certain  that  every  person  will  die 
at  the  age  of  100  or  less  ;  at  the  age  of  39  the  danger 
is  about  one  per  cent,  at  54  it  is  two  per  cent.,  at  60 
it  is  three  per  cent.,  and  at  64  four  per  cent.,  and  so 
on  till  we  reach  the  age  99,  when  it  is  one  hundred  per 
cent.  A  uniform  rate  of  premium  through  life  makes 
it  absolutely  necessary,  like  the  fire  policy  illustration 
given  above,  that  the  premium  during  the  first  few 
years,  and  the  assumed  interest  thereon,  should  be 
large  enough  to  make  up  for  the  additional  risk  of  the 
future. 

The  agent  should  always  be  on  the  watch  to  discover 
what  kind  of  arguments  will  have  the  most  effect.  To 
a  farmer  he  might  show  how  a  policy  on  a  life  would 
pay  off  a  mortgage  on  a  farm,  or  provide  a  sufficient 
sum  to  give  his  children  an  ample  education  in  case  of 
his  early  death  ;  he  might  quote  instances  where  this 
had  been  done,  and  show  how  small  a  sum  of  money 
was  spent  in  keeping  the  policy  in  force.  In  soliciting 
a  merchant,  he  might  show  that  the  rich  merchants  as 
a  class  do  insure  to  very  large  amounts  ;  he  might 
quote  such  names  as  A.  T.  Stewart,  H.  B.  Claflin,  Cy- 
rus W.  Field,  and  many  others  who  have  insurance  to 
the  amount  of  $100,000  and  over  on  their  lives.  To  a 
lawyer  he  might  show  that  his  learning,  experience  and 
reputation  were  his  "stock  in  trade,"  and  by  his  sud- 
den death  so  much  money-producing  ability  would  be 
destroyed 

Prepared  to  meet  Objections. 

To  meet  objections  successfully  the  agent  should  be 
well  posted  as  to  individual  facts,  and  should  also  have 
a  good  knowledge  of  the  science.  A  variety  of  facts 


FOR  LIFE  AGENTS.  95 

illustrating  the  practical  working  of  life  insurance  and 
the  benefits  it  confers  upon  individuals,  is  often  essen- 
tial to  meet  objections  and  cavils.  It  is  highly  import- 
ant that  the  agent  should  have  a  large  number  of  in- 
stances stored  in  his  mind,  where  the  provident  invest- 
ment of  a  few  dollars  in  a  life  policy  was  the  means  of 
saving  a  family  from  want  ;  and  also  be  familiar  with 
the  leading  statistics  of  life  insurance.  He  should 
know  very  nearly  how  many  companies  there  are  in 
the  United  States,  how  many  risks  are  in  force,  and 
their  aggregate  amount,  how  much  is  annually  paid  for 
premiums,  losses  and  surplus  returned.  And  when  any 
one  is  disposed  to  sneer  at  life  insurance,  he  can  pro- 
duce an  array  of  facts  and  figures  which  will  prove  that 
it  is  one  of  the  most  important  financial  interests  in  the 
country.  If  an  agent  is  told  that  life  insurance  is  a 
humbug,  let  him  ask  the  objector  if  it  is  probable  that 
800.000  persons  would  annually  pay  nearly  $90,000,000 
for  a  humbug  ?  If  he  is  told  that  it  is  a  one-sided  game, 
the  agent  can  reply  that  in  the  year  1873  the  life  com- 
panies of  this  country  paid  to  policy-holders  and  their 
heirs  upward  of  $50,000,000  in  losses,  endowments  and 
dividends.  There  are  however  some  of  the  more  com- 
mon objections,  which  cannot  be  disposed  of  in  this 
summary  manner. 

Religions  Scruples. 

Some  people  are  so  superstitious  or  so  ignorant  that 
they  have  some  religious  scruples  against  insuring  their 
lives.  They  think  that  there  is  something  sacred  in  hu- 
man life  which  should  not  be  made  the  subject  of  a  po- 
licy of  insurance.  It  is  regarded  as  almost  as  bad  as 
man-stealing  or  dissecting  a  human  corpse.  All  this 
proceeds  from  a  wrong  impression  of  what  life  insur- 
ance is.  It  is  unfortunate  that  we  have  no  word  to  ex- 
press the  true  idea,  which  is  :  Insurance  of  income-pro- 
ducing power.  A  man  is  valuable  in  a  financial  view 
according  to  what  he  can  earn,  and  it  is  this  quality 
only  which  we  insure.  With  this  view  we  strip  it  of  all 
its  superstitious  fancies,  and  make  it  a  plain  business 
transaction.  It  is  not  many  years  since  some  people 
had  similar  superstitious  ideas  about  putting  lightning- 
rods  over  their  houses,  barns  and  churches.  If  Provi- 
dence designed  that  their  buildings  should  be  struck  by 
lightning,  it  was  considered  wrong  to  attempt  to  turn 
it  aside,  and  so  now  they  think  that  if  they  are  predes- 
tinated to  leave  their  families  in  want  and  poverty  they 
have  no  right  to  insure  their  lives  to  prevent  it. 


96  INSTRUCTION  BOOK 


Is  It  Safe  ? 

It  seems  hardly  necessary  to  go  into  an  extended  an- 
swer to  the  question,  What  is  a  safe  business  ?  There 
are  thousands  of  clerks  and  salesmen  in  our  large  cities 
who  are  struggling  to  commence  a  mercantile  life  on 
their  own  responsibility,  when  the  fact  is  that  on  an 
average  ninety-five  out  of  every  hundred  fail.  There 
are  thousands  of  men  speculating  in  stocks  in  our  large 
cities,  and  every  few  years  a  "Black  Friday"  comes, 
or  a  corner  in  some  favorite  stock,  or  they  "  go  short 
on  Harlem. "  And  their  fortunes  melt  away  in  an  hour. 
The  great  fish  have  eaten  up  the  little  ones.  Savings 
banks  ought  to  be  safe,  but  during  the  past  few  years  a 
large  number  have  failed,  and  in  1871  those  which 
failed  in  New  York  city  caused  a  loss  of  over  $500,000 
to  the  depositors,  and  the  panic  was  so  great  that  over 
$20,000,000  were  drawn  out  of  other  savings  banks  and 
invested  elsewhere.  But  during  the  last  ten  years 
there  has  been  upward  of  $100,000,000  paid  for  losses 
by  our  life  insurance  companies,  and  how  much  has 
been  the  actual  cash  loss  to  the  policy-holders  of 
those  which  have  failed?  Less  than  $200,000,  or  one 
fifth  of  one  per  cent,  on  the  losses  paid.  Can  the  ob- 
jector mention  any  other  kind  of  business  as  safe  as 
this? 

Rich  Enough  Already. 

Is  he  absolutely  sure  that  his  family  or  those  depend- 
ent upon  him  will  always  be  so  ?  Has  he  made  a  pro- 
vision for  them  so  ample  and  secure  that  a  policy  in  a 
life  company  will  add  nothing  to  it  ?  Up  the  marble 
steps  of  one  of  our  life  insurance  offices  an  aged  widow 
is  sometimes  seen  ascending,,  as  she  enters  to  draw  the 
periodical  payment  of  an  annuity  which  her  husband 
was  persuaded  to  purchase  for  her  when  he  was  a  pro- 
minent and  successful  speculator  in  Wall  Street.  He 
was  "  rich  enough  already."  He  did  not  want  anything 
to  do  with  life  insurance,  and  when  he  purchased  this 
annuity,  he  half  believed  he  was  doing  a  foolish  act 
which  would  be  of  no  use  to  her,  but  now  it  is  her  only 
support.  Most  of  our  wealthy  men  do  not  believe  that 
they  are  ' '  rich  enough  "  to  do  without  life  insurance. 
They  are  the  most  liberal  patrons  of  our  companies  ; 
they  regard  it  as  a  safe  investment,  and  a  necessary 
protection. 


FOR  LIFE  AGENTS.  97 


In  Debt. 

It  is  a  sad  thing  to  live  in  debt,  but  that  is  not  the 
worst  that  can  happen  to  a  man.  While  life  remains 
there  is  some  prospect  of  getting  free  from  one's  em- 
barrassments, but  death  allows  no  remedy  for  the  mis- 
fortunes of  life.  To  die  badly  in  debt,  when  all  the 
property  one  may  have  accumulated  will  have  to  be 
sacrificed  to  pay  the  just  claims  of  creditors,  must  be  a 
sad  prospect  to  contemplate.  To  such  a  man,  life  is  a 
failure.  But  life  insurance  provides  a  remedy  for  this  ; 
it  allows  a  man  to  hedge  or  to  protect  himself  from  this 
disaster  if  he  is  wise  in  time,  and  to  throw  his  burdens 
upon  a  company  which  is  able  and  willing  to  bear  them. 
When  a  man  is  badly  in  debt,  and  has  no  means  of  ex- 
tricating himself  immediately,  life  insurance  is  a  duty, 
and  he  should  provide  means  to  get  clear  of  his  obliga- 
tions as  soon  as  possible.  If  he  d5oes  not,  he  is  de- 
frauding his  creditors.  It  is  his  duty  to  be  honest  with 
them,  and  posthumous  honesty  (if  sxich  an  expression 
is  admissible)  is  as  important  as  any  other.  All  this  is 
provided  for  by  a  life  insurance  policy.  Life  enables 
him  to  throw  it  off  by  his  own  exertions,  and  if  death 
comes  before  he  is  entirely  successful,  the  company  ac- 
complishes the  remainder. 

The  Money  is  needed  for  Business  Purposes. 

Some  people  think  they  can  use  their  money  at  bet- 
ter advantage  in  business.  Perhaps  they  can  ;  but  as 
this  is  a  matter  of  uncertainty,  we  will  see  what  per 
cent,  can  be  made  in  life  insurance.  A  man  aged  25 
spends  twenty  dollars  a  year  on  a  life  policy  of  $1,000. 
If  he  dies  during  the  first  year  the  profit  is  5,000  per 
cent.  If  he  pays  ten  premiums  and  gets  no  dividends 
or  increased  insurance,  and  then  dies,  his  profits  are 
360  per  cent. ,  reckoning  compound  interest  on  his  pre- 
miums at  six  per  cent.  Suppose  he  pays  for  twenty 
years,  and  the  amount  insured  is  increased  by  rever- 
sionary insurance  to  $1,400,  his  premiums  at  six  per 
cent,  and  compound  interest  will  amount  to  nearly 
$780,  and  he  will  make  nearly  18  per  cent,  on  his  pay- 
ments in  case  of  death  at  this  time.  It  is  a  matter  of 
simple  prudence,  then,  to  spend  some  money  in  life 
insurance,  oven  if  it  is  taken  from  the  regular  business. 
Taking  into  consideration  the  protection  which  is  of- 
fered by  his  policy,  and  the  percentage  of  profit  it 
would  bring  to  his  heirs  in  case  of  death,  there  is  no 


98  INSTR UCTION  BOOK 

way  of  investing  money  which  would  yield  greater  re- 
turns. 

The  Money  spent  in  paying  other  Death  Claims 
is  a  Loss. 

So  is  the  money  spent  in  paying  policemen  to  pro- 
tect our  property,  in  paying  for  a  city,  State,  and  na- 
tional government.  For  the  money  spent  in  this  man- 
ner we  get  no  returns,  as  when  invested  in  stocks  and 
bonds,  but  the  money  is  not  lost  ;  protection  is  pur- 
chased ;  the  sense  of  security  to  life  and  person  and 
property  is  what  we  get  in  return.  So  in  life  insurance: 
a  policy  is  a  protection  to  some  one  against  poverty 
and  want,  and  so  far  it  is  a  positive  benefit  to  him  who 
pays  the  annual  premiums.  But  suppose  the  ' '  death 
claim"  should  happen  to  arise  from  the  objectors' 
own  policy  ;  how  then  ? 

No  oue  Dependent  upon  Him. 

This  is  not  a  natural  condition  for  a  man  to  be  in. 
If  this  excuse  is  made  in  sincerity,  it  is  a  confession 
that  the  man  is  leading  a  selfish  life,  a  sort  of  waif  upon 
society.  Such  reasons  are  seldom  made  in  earnest ; 
they  are  designed  simply  as  excuses  for  not  giving  the 
subject  attention.  If  he  has  parents  who  are  living, 
and  whose  circumstances  compel  them  to  labor  for  a 
livelihood,  then  it  would  be  an  act  of  filial  gratitude  to 
have  his  life  insured  for  their  benefit.  If  their  old  age 
cannot  be  made  free  from  care  and  labor  by  his  life,  it 
ought  to  be  made  free  from  want  in  case  of  his  death. 
But  this  is  not  an  honorable  position  to  be  in,  nor  one 
to  be  envied.  Every  honest  and  honorable  young  man 
looks  forward  to  the  time  when  he  shall  be  able  to  have 
others  dependent  upon  him  for  support,  and  life  insur- 
ance will  enable  him  to  leave  them  free  from  want. 

Some  Other  Tune  will  do  as  well. 

No,  it  will  not  !  Every  succeeding  year  increases 
the  rate  of  premium,  and  renders  it  more  probable  that 
the  man  may  be  rejected.  The  rates  for  a  life  policy 
in  most  of  the  mutual  companies  is  about  double  at 
forty-six  what  they  are  at  twenty-five,  and  at  fifty-five 
they  are  three  times  as  much .  If  a  man  ever  intends 
to  insure  his  own  life,  he  should  do  it  as  soon  as  pos- 
sible* "  Some  other  time  "  the  man  may  be  killed  by 
an  accident,  disease,  or  other  mishap.  No  reliance  can 


FOR  LIFE  AGENTS.  99 

be  placed  upon  the  future  ;  the  force  of  the  arguments 
now  presented  may  pass  away  or  be  entirely  forgotten. 
We  have  read  of  a  place  which  is  paved  with  good  in- 
tentions, and  we  doubt  not  but  good  intentions  in  life 
insurance  cover  a  large  surface. 

The  Policy  may  Lapse. 

A  man  should  never  take  more  insurance  than  he 
can  pay  for.  If  he  cannot  be  tolerably  sure  of  paying 
the  premiums  on  $10,000,  let  him  try  one  of  $5,000  or 
less,  and  when  his  circumstances  admit  of  it,  the  sum 
can  be  increased.  This  result  can  be  avoided  by  tak- 
ing that  kind  which  will  admit  of  a  paid-up  policy  after 
a  few  years.  If  a  policy-holder  will  adopt  these  three 
rules,  there  is  little  danger  of  his  policy  lapsing  :  He 
should  never  take  a  larger  policy  than  there  is  a  reasonable 
prospect  of  his  being  able  to  carry ;  he  should  choose  that 
kind  whose  payments  are  most  suited  to  his  condition, 
and  then  let  him  resolve  to  keep  the  policy  alive  at  att 
hazards. 

Reasons  for  insuring. 

An  agent  should  always  act  on  the  offensive  if  possi- 
ble. It  is  not  so  much  his  duty  to  defend  life  insur- 
ance as  to  recommend  it.  Indeed,  we  do  not  know 
but  any  attack  iipon  life  insurance,  as  a  method  of 
providing  against  future  calamity,  should  be  met  with 
silent  contempt.  It  is  so  well  known  and  so  universal, 
that  he  who  looks  upon  it  as  a  humbug,  and  proclaims 
his  opinion  as  such,  confesses  himself  to  be  ignor- 
ant of  one  of  the  great  financial  organizations  of  the 
day.  But  when  men  bring  up  objections  against  life 
insurance,  the  best  way  is  to  assume  the  offensive  imme- 
diately and  give  the  objector  all  he  can  do  to  answer 
the  arguments  in  its  favor.  Since  the  agent  is  con- 
vinced that  he  has  the  strongest  side  of  the  case,  he 
should  come  outside  of  the  walls  and  fight,  and  not  be 
satisfied  with  merely  defending  himself  behind  breast- 
works. 

For  this  reason  we  present  a  few  of  the  most  common 
arguments  which  may  be  used  in  favor  of  life  insur- 
ance, leaving  it  for  the  agent  to  illustrate  them  by  indi- 
vidual facts  as  he  may  see  proper  : 

Life  is  uncertain.  Every  one  knows  that  this  is  true 
as  respects  other  persons  than  himself.  It  is  easy  for 
an  agent  to  show  him  what  per  cent,  is  the  tabular  risk 
of  his  dying  at  a  given  age,  and  how  this  risk  is  in- 


100  INSTRUCTION  HOOK 

creasing  every  year.  If  some  one  apparently  in  good 
health  and  well  known  has  suddenly  died,  such  an  il- 
lustration may  make  this  argument  very  effective. 

Unwise  to  defer.  These  old  saws, ' '  Be  wise  in  time, " 
"Delay  not,"  "Procrastination  is  the  thief  of  time," 
etc.,  are  almost  as  ancient  as  the  human  language,  and 
their  universality  and  antiquity  perhaps  destroys  their 
value  ;  but  tell  a  man  that  on  an  average  every  year  of 
delay  adds  to  the  cost  of  a  policy,  that  the  annual  pre- 
mium must  be  increased  with  the  additional  probability 
of  death,  and  the  agent  has  touched  his  pocket.  Ac- 
cording to  all  the  calculations  in  use,  the  older  a  per- 
son becomes  after  the  period  of  youth  the  greater  the 
danger  of  death,  and  also  the  annual  expense  to  pay 
the  death  claims  of  others.  The  sooner  one  insures, 
then,  as  a  general  rule,  the  less  it  will  cost  him. 

Life  insurance  adds  to  the  length  of  one's  life.  The 
Irishman  who  remained  perfectly  unconcerned  when 
the  ship  was  sinking,  because  he  had  just  been  insured, 
was  right  in  theory,  but  wrong  in  the  manner  of  appli- 
cation. Whatever  makes  a  person  free  from  care  in  re- 
gard to  want  and  the  support  of  his  family,  has  a  tend- 
ency to  prolong  life.  Persons  who  are  supported  by 
annuities  live  much  longer  than  the  average  of  man- 
kind ;  the  same  is  true  of  pensioners  on  the  govern- 
ment, and  also  of  those  in  private  life  who  have  no 
care  for  the  future  and  whose  habits  of  living  are  cor- 
rect. Life  insurance  has  the  same  effect ;  it  gives  the 
assured  a  calm  satisfaction  that  in  case  of  his  sudden 
death  he  has  made  provision  for  those  who  are  depend- 
ent upon  him,  and  just  so  far  as  life  insurance  produces 
this  result,  so  far  it  tends  to  prolong  his  life. 

Every  man  can  leave  his  family  free  from  want.  Be- 
fore fire  insurance  became  universal,  when  a  man's 
house  burned  down  his  neighbors  used  to  contribute  to 
enable  him  to  rebuild  and  make  up  his  loss  ;  but  now 
he  goes  to  his  company,  and  it  writes  a  check  for  the 
amount  of  insurance.  How  does  this  differ  from  the 
old  method  ?  Simply  thus  :  All  who  have  policies  in 
the  same  fire  company  made  their  contributions  when 
they  paid  their  premiums,  and  they  entrust  the  mo- 
ney to  the  company  till  the  fire  takes  place,  and  then  the 
company  pays  the  amount  insured.  In  a  life  insurance 
company  all  the  policy-holders  mutually  protect  each 
other  by  paying  a  stipulated  sum  in  advance  for  every 
thousand  dollars  of  insurance  they  receive,  and  in  case 
of  the  death  of  one  of  their  number,  their  contribu- 
tions"having  been  made,  the  company  pays  the  amount 


FOR  LIFE  AGENTS.  101 

insured  over  to  the  heirs  of  the  deceased.  Instead  of 
having  to  contribute  to  the  support  of  his  family  after 
he  is  dead,  they  make  their  contributions  while  he  is 
living.  There  is  no  charity  or  benevolence  in  this  ;  it  is 
simply  a  business  matter  for  avoiding  chanty  and  be- 
nevolence. This  is  a  privilege  which  every  man  can  en- 
joy who  begins  when  he  is  in  good  health.  If  life  in- 
surance ever  becomes  universal  in  this  country,  nearly 
all  want  and  destitution  will  be  confined  to  those  who 
come  from  other  lands  where  it  is  not  so  much  prac- 
ticed. 

A  policy  is  an  immediate  provision  for  one's  family  in 
case  of  death.  A  policy  is  a  contract  by  which  the  com- 
pany agrees  to  pay  the  sum  insured  on  certain  condi- 
tions— usually  upon  the  death  of  the  insured,  or,  in  case 
of  an  endowment,  the  attaining  of  a  certain  age.  "When 
this  takes  place,  the  amount  of  insurance  is  realized.  It 
is  creating  a  contingent  fortune  out  of  a  small  annual 
premium.  It  is  making  a  will  and  leaving  the  family 
a  certain  amount  of  money  which  the  policy-holder  has 
not  got  and  never  had. 

This  argument  is  so  ably  presented  by  Hon.  Elizur 
Wright  that  we  quote  it  in  full. 

"  In  the  old  order  of  things  a  man's  estate  or  source  of  income, 
if  of  any  considerable  magnitude,  was  usually  of  such  a  nature 
that  not  much  of  it  could  be  buried  with  him.  It  remained  be- 
hind to  nourish  his  heirs.  But  since  the  more  general  diffusion 
of  knowledge  and  machinery  has  multiplied  the  men  whose 
minds  are  solely  their  estates,  and  very  productive  ones  too,  the 
bread  of  the  fatherless  is  too  often  buried  with  the  father.  And 
it  is  not  the  laborer's  crust  that  is  taken  so  suddenly  from  the 
child's  mouth,  but  the  provender  of  princes.  The  handle  of  a 
switch  pointing  a  few  degrees  in  a  wrong  direction  may  not  only 
extinguish  a  constellation  of  the  lights  of  society,  but  precipitate 
a  score  of  families  from  affluence  to  destitution.  Though  mate- 
rial wealth  has  increased  at  equal  pace  with  general  knowledge, 
yet  it  is  now  the  rule  rather  than  the  exception  that  young  men 
set  out  in  life  with  but  very  little.  Their  patrimony  they  have 
invested  in  mental  culture.  If  they  are  to  have  families,  they 
must  either  wait  single  till  by  their  industry  they  have  accumu- 
lated funds,  or  run  the  risk  of  leaving  destitute  the  helpless  beings 
whose  support  they  have  assumed.  Here  life  insurance  comes  to 
their  aid  by  guaranteeing  at  once,  in  case  of  death,  a  sufficient 
fund  to  sustain  the  widow  and  orphans.  This  it  does  in  consid- 
eration of  a  moderate  annual  payment  to  be  continued  for  a  term 
of  years,  or  for  life.  To  the  young  man  whose  income  is  some- 
what more  than  adequate  to  the  unavoidable  current  expenses  of 
a  family,  the  life  insurance  company  says,  '  If  Nature  bids  you 
marry,  and  only  Poverty  forbids,  obey  Nature  and  we  will  take 
care  of  Poverty.  Do  it  now  in  your  prime,  and  let  the  next  gen- 
eration inherit  from  you  all  the  strength  and  genius  which  the 
best  conditions  will  allow.'  The  savings  bank  says,  'No,  my 
friend,  the  voice  of  Natnre  is  premature  and  imprudent ;  you 


102  JNSTE UCTION  BOOK 

had  better  wait  a  few  years — half  a  dozen  at  least.'  So  say  all  the 
other  means  and  institutions  for  the  accumulation  of  capital,  and 
consequently  leave  the  general  happiness,  not  to  speak  of  the 
good  order  and  good  morals  of  society,  in  the  lurch.  Life  insur- 
ance possesses  exclusively  the  power  of  creating  at  ouce  an  ade- 
quate provision  against  the  destitution  of  dependents  in  case  of 
death." 

Life  insurance  enables  one  to  provide  for  himself  in  old 
aye.  Next  to  leaving  others  dependent  and  in  want,  is  to 
find  one's  self  in  that  condition  when  the  fires  of  youth 
and  the  strength  of  manhood  have  passed  away. 

"  Is  there  any  sadder  sight  to  contemplate  than  that  of  a  poor 
old  man  whose  days  of  usefulness  are  over,  one  whose  opportu- 
nities for  making  a  fortune  are  past,  and  who,  by  want  of  foresight 
or  by  misfortiines,  finds  himself  near  the  end  of  his  journey  and 
his  life  a  perfect  failure  ?  His  example  is  only  a  beacon  to  warn 
others  of  their  danger.  He  is  neither  welcomed  nor  honored, 
nor  hardly  ever  respected  in  good  society;  and  when  he  lias 
reached  the  end  of  his  life  he  will  depart  without  leaving  any- 
thing  for  those  who  have  in  vain  looked  to  him  for  a  comfortable 
support.  In  his  younger  days  he  might  have  taken  out  an  en- 
dowment policy,  and  the  influence  of  such  an  act  of  forethought 
would  have  made  him  more  careful  as  a  business  man,  and  the 
policy,  when  payable,  would  have  placed  him  above  the  fear  of 
want.  Is  there  anything  worse  than  this  ? 

"  Yes,  there  is  one  other  picture  more  sad,  more  pitiable.  It  is 
that  of  a  poor  woman  who  in  the  helplessness  of  old  age  is  left 
alone  in  the  world.  There  are  many  such  who  have  been  reared 
in  wealth  and  affluence,  and  during  the  greater  part  of  their  days 
have  basked  in  the  sunshine  of  prosperity.  But  death  has  en- 
tered her  household  and  taken  away  her  husband,  the  protector 
of  her  life,  and  her  happy  dream  of  wealth  has  been  changed  to 
the  stern  realities  of  poverty.  Her  husband,  once  reputed  rich, 
died  poor.  His  plans  for  amassing  a  fortune  were  not  realized 
when  the  stern,  unwelcome  messenger  came,  and  she  found  her- 
self face  to  face  with  all  the  hardships  and  bitterness  of  poverty. 
Xo  life  insurance  policy  was  at  hand  to  gladden  her  sad  heart, 
like  an  angel  of  joy  in  her  affliction  ;  her  husband  had  not  the 
time  to  attend  to  it,  or  the  money  to  spare  from  his  business,  or 
the  expenses  of  his  establishment  were  too  great,  and  life  insur- 
ance was  dismissed  as  unworthy  of  a  thought." — How  to  Die 
Rich. 

Money  value  of  a  policy.  There  is  a  certain  class  of 
men  who  may  be  induced  to  insure  on  the  endowment 
plan,  because  there  is  a  money  valne  in  a  policy  of 
this  kind  which  is  certain  of  being  realized  provided 
they  survive  the  term  of  insurance.  In  this  policy  a 
large  part  of  the  premium  is  taken  for  the  reserve, 
and  by  yearly  accumulation  it  becomes  equal  to  the 
sum  assured.  While  furnishing  insurance  it  may  also 
be  used  as  a  security,  or  for  the  payment  of  debts.  As 
this  however  is  not  often  resorted  to  it  should  not  be 


FOR  LIFE  AGENTS.  103 

presented  except  to  those  whose  business  may  require 
them  to  make  some  such  use  of  it. 

A  safe  investment.  There  are  over  $50, 000, 000  in  vested 
in  the  capital  of  the  fire  insurance  companies  operating 
in  the  city  of  New  York,  and  their  gross  assets  amount  to 
over  $100,000,000.  Every  few  years  a  great  fire  takes 
place  which  annihilates  a  few  millions  of  stock,  and  the 
stockholders  make  up  the  deficiency.  More  than  $20,  - 
000,000  capital  and  $40,000,000  including  assets  was  de- 
stroyed by  the  Chicago  fire,  but  that  did  not  deter 
parties  from  coming  forward  and  putting  up  an  equal 
amount  to  make  it  good.  They  knew  perfectly  well 
that  it  was  not  an  absolutely  safe  investment,  but  they 
took  the  risk  and  the  profit  into  consideration.  But 
all  the  unavoidable  cash  losses  to  policy-holders  in  life 
companies  by  failures  in  the  United  States  has  been 
less  than  one  per  cent,  of  the  total  fire  insurance  loss 
at  Chicago.  Taking  these  facts  for  a  guide,  which  are 
mere  examples  and  do  not  exhaust  the  subject,  the  ra- 
tio of  safety  between  money  paid  to  a  life  company  and 
money  invested  in  fire  insurance  stock  is  about  two 
hundred  to  one. 

Examples  of  our  best  financiers.  Those  who  take 
the  largest  lines  of  insurance  are  our  best  financiers. 
They  are  men  who  understand  the  value  of  money  and 
how  to  use  it  to  the  best  advantage;  they  comprise  our 
wealthiest  merchants,  bankers,  and  brokers,  and  not  a 
few  life  insurance  officers  and  agents.  If  there  were  a 
probability  that  life  insurance  would  prove  a  bad  in- 
vestment, the  latter  class  would  be  the  first  to  find  it 
out,  but  the  fact  is,  there  are  scores  of  them  in .  New 
York  city  alone  who  have  their  lives  insured  in  sums 
from  $25,000  to  $100,000.  It  is  not  every  doctor  who 
will  take  his  own  medicine  like  this. 

One  Plan  of  Insurance. 

Having  learned  what  kind  of  insurance  would  prob- 
ably be  most  acceptable  to  the  party  solicited,  the  agent 
should  present  only  one  kind  for  his  consideration,  un- 
less he  manifests  a  preference  for  some  other.  If  an 
agent  talks  life,  ten  payment,  and  then  endowment  in- 
surance, he  will  be  apt  to  get  the  applicant  so  confused 
that  he  will  not  choose  either.  If  the  agent  attempts 
to  figure  out  with  his  pencil  how  half  a  dozen  kinds  will 
operate,  how  much  he  will  have  to  pay  for  a  certain 
term  of  years,  the  man  will  want  to  think  the  matter 
over  a  few  weeks,  and  perhaps  it  will  end  in  some  more 
skillful  agent  getting  him  into  another  company.  Wheu 


104  INSTRUCTION  BOOK 

the  agent  has  once  made  up  his  mind  what  plan  is  the 
most  appropriate,  and  most  likely  to  be  kept  in  force 
till  all  the  premiums  are  paid,  he  should  hold  his  atten- 
tion to  that  only  ;  but  if  the  applicant  desires  some 
other  kind,  the  agent  should  be  careful  to  explain  the 
difference  between  them,  so  that  he  may  choose  under  - 
staudingly.  As  a  general  rule,  men  are  so  ignorant  of 
life  insurance  that  they  take  such  kind  of  policies  as 
are  recommended  to  them  by  the  agents.  We  hope  the 
time  will  come  when  the  different  qualities  will  be  well 
understood  by  the  public,  but  until  then,  the  honesty 
and  faithfulness  of  the  agent  will  be  tested,  for  he  is 
too  apt  to  recommend  those  plans  which  bring  the 
largest  commissions,  irrespective  of  the  wants  of  the 
policy-holder. 

Making  out  the  Application. 

At  the  proper  time,  when  the  applicant  is  sufficiently 
convinced,  he  should  commence  filling  out  the  applica- 
tion, the  agent  affording  him  every  assistance,  but  ne- 
ver, where  it  can  possibly  be  avoided,  writing  a  word  of 
it  himself.  The  agent  should  explain  the  different 
questions  of  the  application  and  the  reason  why  so 
many  are  asked.  If  a  man  was  going  to  buy  a  farm 
and  pay  $10,000  for  it,  and  had  no  means  of  seeing  it 
himself,  but  had  to  depend  upon  the  opinions  of  ano- 
ther and  the  testimony  of  the  owner,  would  he  not  be 
apt  to  ask  a  great  many  questions  and  insist  upon  their 
being  answered  definitely  ?  In  this  case  the  company 
agrees  to  pay  $10,000,  more  or  less,  for  carrying  this 
risk  through  life  or  any  other  period,  and  it  is  the  com- 
pany's duty  in  justice  to  the  remaining  policy-holders 
to  have  the  fullest  information.  This  application  is  the 
only  guide  which  the  medical  examiner  at  the  home  of- 
fice has  of  judging  of  the  health  of  the  party  insured, 
and  it  is  of  the  utmost  importance  that  every  part  of  it 
should  be  done  as  directed.  All  the  blanks  should  be 
filled  out  with  a  clear  and  legible  handwriting,  and  es- 
pecial pains  should  be  taken  to  write  the  proper  names 
in  full  and  correctly. 

Medical  Examinations. 

The  medical  examination  should  follow  as  soon  as 
possible  after  the  application  is  signed.  The  applicant 
^is  usually  a  little  impatient  to  know  whether  he  is  ac- 
cepted or  not.  It  creates  a  favorable  impression  to 
have  the  affair  completed  with  no  unnecessary  delay. 


FOR  LIFE  AGENTS.  105 

The  agent  should  remember  that  the  commission  is  ne- 
ver secured  till  the  policy  is  accepted  and  the  premium 
paid,  and  that  there  are  many  chances  of  failure  when 
the  agent  thinks  it  is  perfectly  safe.  lu  the  medical  ex- 
amination the  agent  has  no  right  to  intimate  or  suggest 
what  the  replies  to  any  of  the  examiner's  questions 
should  be.  He  should  not  be  present  when  the  exam- 
ination is  made. 


Delivering  the  Policy. 

The  policy  should  be  delivered  as  soon  as  it  is  re- 
ceived by  the  agent.  Delays  are  dangerous,  for  a  poli- 
cy-holder may  change  his  mind  and  refuse  to  take  it,  in 
which  case  the  medical  examiner's  fee,  the  expense  of 
making  the  policy,  and  the  agent's  trouble,  are  entirely 
lost.  The  agent  should  receive  the  premium  when  he 
delivers  the  policy.  If  the  premium  is  not  ready  he 
should  retain  the  policy  till  it  is,  or  make  such  arrange- 
ments for  it  as  the  company  permits,  so  that  it  may  be 
perfectly  safe.  Although  policies  say  that  the  contract 
is  not  binding  unless  the  premium  is  paid  in  advance, 
yet  the  courts  have  made  so  many  decisions  adverse  to 
companies  on  this  and  other  points  of  a  similar  nature, 
that  it  is  very  unsafe  to  run  the  risk,  for  in  case  the  po- 
licy-holder should  die  shortly  after  the  policy  is  deliv- 
ered, and  before  the  premium  is  paid,  the  company 
might  be  held  liable  for  the  loss  on  the  ground  that  the 
agent  had  waived  the  payment  of  the  premium  for  the 
present.  (See  Chapter  XV.) 


Semi-annual  and  Quarterly  Premiums. 

Semi-annual  and  quarterly  premiums  should  be  avoid- 
ed if  possible.  The  agent  should  not  speak  of  the 
semi-annual  or  quarterly  rates  unless  the  applicant  asks 
for  them.  They  make  from  two  to  four  times  as  much 
office  work  as  annual  rates,  and  the  policies  are  much 
more  liable  to  lapse.  The  policy-holder  gets  tired  of 
paying  premiums  every  few  months,  and  finally  con- 
cludes that  as  the  quarterly  or  half-yearly  premium  is  a 
small  matter,  it  may  as  well  be  given  up  altogether.  The 
agent  too  cannot  come  around  every  three  or  six  months 
to  collect  a  quarterly  or  half-yearly  premium;  the  com- 
mission is  too  small  and  the  policy-holder  is  neglected. 
This  is  the  history  of  too  many  policies  which  encum- 
ber the  registers  of  the  companies,  which  otherwise 
would  have  been  kept  in  force. 


106  INSTRUCTION  BOOK 

"  Not  Taken  "  Policies. 

We  come  now  to  treat  of  a  subject  which  is  a  great 
misfortune  to  many  companies  and  a  perfect  disgrace 
to  their  agencies.  The  vast  number  of  "not  taken" 
policies  which  appear  in  our  State  reports  shows  that 
there  is  a  fearful  lack  of  correct  business  talent  among 
agents.  It  looks  bad  for  a  company  and  still  worse  for 
an  agency  to  have  a  large  list.  It  shows  that  the  agents 
have  been  trying  to  do  a  sensational  business — that  they 
are  seeking  to  make  a  good  show  at  the  expense  of  the 
company. 

In  the  great  hurry  to  get  applications,  there  is  a  ne- 
glect of  securing  the  policy-holder  after  the  policy  is 
made.  It  is  as  much  the  duty  of  the  agent  to  deliver 
the  policy  and  secure  the  premium  as  it  is  to  get  the  ap- 
plication, yet  this  part  is  often  grossly  neglected  ;  the 
man  is  allowed  to  get  tired  of  his  bargain  and  finally 
concludes  that  he  will  not  insure  at  all.  In  many  com- 
panies from  twenty  to  forty  per  cent,  of  the  business 
is  canceled  as  "  not  taken."  This  is  unjust  to  the  re- 
maining polircy-holders.  Every  policy  with  the  medic- 
al examination  and  office  labor  and  expense  costs  ten 
dollars  or  more,  and  if  five  thousand  policies  are  writ- 
ten in  a  year,  and  one  or  two  thousand  are  ' '  not 
taken, "  here  are  ten  or  twenty  thousand  dollars  of  ex- 
penses put  upon  the  remaining  three  or  four  thousand 
policy-holders,  which  must  come  out  of  their  return 
surplus.  Companies  are  greatly  to  blame  for  this  state 
of  things  ;  they  ought  to  require  a  reason  of  such  an 
agent  why  his  policies  are  "not  taken,"  and  find  out 
whose  fault  it  is.  It  would  also  be  an  improvement  to 
make  every  policy-holder  pay  for  his  own  medical  ex- 
amination, which  is  done  in  some  companies;  then  one 
great  source  of  expense  would  be  removed  and  the  ap- 
plicant would  feel  himself  somewhat  under  obligation 
to  take  the  policy.  Wherever  this  plan  has  been  tried, 
it  has  had  a  signal  success  in  diminishing  the  "  not 
taken  "  policies. 

Small  Policies. 

An  agent  should  never  despise  small  policies.  If  he 
commences  with  a  stranger  by  talking  to  him  of  a  $10,- 
000  policy,  premium  $500  per  annum,  it  is  doubtful  if 
he  can  persuade  him  to  insure  ;  but  if  he  can  succeed 
in  getting  him  to  insure  for  some  amount,  if  it  is  not 
more  than  $500  or  $1,000,  and  then  fill  out  the  appli- 
cation, leaving  the  sum  blank,  when  it  is  ready  to 


FOR  LIFE  AGEXTS.  107 

be  signed,  the  agent  can  tell  him  that  this  is  rather  a 
small  amount  for  so  much  trouble,  and  that  it  ought  to 
be  about  $2,000  or  $5,000.  Some  of  our  largest  com- 
panies have  their  policies  average  less  than  $2,500 
each,  and  by  far  the  greatest  number  of  policies  are 
written  for  sums  of  $1,000  or  $2,000. 

Habits  and  Occupation. 

Although  the  medical  examiner  is  the  final  arbiter  of 
the  acceptance  or  rejection  of  a  risk,  yet  there  are  some 
circumstances  attending  the  occupation  and  habits  of 
applicants  which  an  agent  should  understand  in  order 
that  he  may  recommend  a  risk  intelligently,  or  know 
that  it  is  one  that  the  company  will  probably  refuse.  It 
is  mortifying  to  an  agent  to  spend  a  long  time  in  secur- 
ing a  risk,  and  then  to  have  it  rejected  at  the  home  of- 
fice, and  still  more  to  the  applicant  who  has  become 
convinced  of  the  value  of  life  insurance.  The  company 
is  also  put  to  some  additional  expense  for  the  medical 
examiner's  fee,  which  must  be  paid  by  the  other  policy- 
holders.  It  is  practically  impossible  for  the  agent  to  be 
so  well  informed  that  he  will  wholly  avoid  making  mis- 
takes of  this  kind,  yet  there  are  a  few  plain  and  simple 
directions  which  will  enable  him  to  give  a  good  practi- 
cal estimate  of  the  probability  that  an  applicant  will  be 
accepted  or  rejected. 

The  age  of  the  applicant  has  an  important  influence 
on  the  value  of  the  risk.  Children  under  five  years  of 
age  are  not  proper  subjects  for  insurance,  as  the  mor- 
tality during  this  time  is  over  fourteen  per  cent.  One 
seventh  of  all  children  die  before  the  age  of  five  years, 
and  the  danger  of  dying  before  puberty  is  much  greater 
than  during  the  years  immediately  subsequent.  The 
best  risks  are  between  the  twenty-fifth  and  fortieth 
years,  for  during  this  time  the  influences  of  hereditary 
maladies  are  less  to  be  dreaded  and  the  system  is  best 
fitted  to  resist  disease. 

Agents  should  never  attempt  to  insure  persons  ad- 
dicted to  intemperate  habits,  and  even  a  reformed 
drunkard  should  be  looked  upon  with  suspicion,  for  his 
previous  course  may  have  sown  the  seeds  of  some  fatal 
disease.  According  to  the  observations  of  Mr.  Neison, 
of  England,  the  rate  of  mortality  among  intemperate 
persons  is  fearfully  high,  unequaled  by  the  results  made 
on  any  other  class  of  the  population  of  the  country. 
Between  the  ages  21  and  30,  the  mortality  of  this  class 
is  five  times  as  great  as  that  of  the  general  community, 
and  four  times  as  great  during  the  succeeding  20  years. 


108  INSTB  UCTION  SO  OK 

It  is  not  deemed  advisable  to  explain  the  influence  or 
tendency  of  certain  diseases  upon  the  applicant,  as  this 
is  in  the  province  of  the  medical  examiner,  but  the  fol- 
lowing remarks  of  Dr.  Allen  upon  the  influence  of  dif- 
ferent occupation  son  the  health,  are  interesting  and  im- 
portant to  agents:* 

Professional  Men. — Teachers  exhibit  the  greatest  longevity. 
Next  come  clergymen,  who  are  subject  to  few  diseases  save  those 
incident  to  sedentary  habits.  Contrary  to  the  vulgar  opinion 
they  are  not  more  liable  than  others  to  pulmonary  affections.  Dys- 
pepsia with  its  incidents  is  their  principal  affection.  Lawyers 
rank  nest.  Then  professional  lecturers,  and  next  physicians.  Of 
the  latter  it  may  be  said  as  a  class  they  have  not  the  ordinary  ex- 
pectation of  life  by  from  one  third  to  one  fifth  subtraction  ;  nev- 
ertheless, the  variety  of  exposure  and  habits  is  such  that  each 
case  requires  isolated  investigation. 

Artists. — Painters  and  sculptors  rank  among  the  best  risks,  par- 
ticularly when  the  former  sketch  from  nature  and  the  latter  mere- 
ly model.  Portrait  painters  and  sculptors  who  cut  marble  them- 
selves are  not  good  risks.  Photographers  and  daguerreotypists 
rank  second  class. 

Artisans  and  Mechanics. — Painters  using  lead  and  oils  are  unde- 
sirable risks,  yet  need  not  be  wholly  rejected.  Workers  in  phos- 
phorus and  quicksilver  stand  upon  the  same  level.  Stone-cutters 
and  millers,  and  similar  occupations  where  insoluble  or  irritant 
particles  find  constant  access  to  the  pulmonary  surface,  are  less 
desirable,  but  improved  methods  of  ventilation  now  in  vogue 
render  them  less  objectionable  than  formerly.  Glass-blowers  are 
poor  risks.  Compositors  in  printing-houses  signally  demand  cau- 
tion in  acceptance.  Blacksmiths,  furnace  men,  carpenters,  coop- 
ers and  cabinet  makers  range  among  the  most  healthy  operatives. 
Shoemakers  and  harness-makers,  mainly  from  their  sedentary  ha- 
bits, are  second-class  risks.  The  same  remark  may  be  made  of 
tailors.  Butchers  and  market-men,  aside  from  the  chances  of  ac- 
cident, (to  the  former  particularly,)  are  good  risks.  Machinists, 
plumbers,  tinsmiths,  tallow-chandlers  and  barbers,  and  similar 
occupations,  are  good  risks.  Engravers,  jewelers  and  the  like, 
are  liable  to  the  diseases  of  sedentary  life,  but  are  otherwise  un- 
objectionable. Brewers,  confectioners,  dyers,  hatters,  bakers, 
and  others  whose  business  involves  constant  exposure  to  warm 
vapors,  often  impregnated  with  medicinal  or  poisonous  substances, 
are  not  as  desirable.  Chemists,  assayers,  gilders,  tobacconists, 
etc.,  are  liable  to  the  same  objections.  Day  laborers,  unless  ex- 
posed to  accidents,  are  equally  good  risks  as  mechanics.  Agri- 
cultural laborers  in  salubrious  localities  are  the  highest  order  of 
desirable  applicants. 

The  best  lives,  other  things  being  equal,  are  those  of  persons 
engaged  in  out  door  and  yet  protected  employments,  where  the 
occupation  is  somewhat  sedentary,  and  yet  combined  with  a  cer- 
tain amount  of  muscular  exercise,  with  pure  ah1  and  variation 
enough  to  secure  a  stimulating  impression  upon  the  system.  In- 
ertia, indolence,  and  absolute  uniformity  of  meteorological  influ- 
ences, are  as  prejudicial  as  over-exertion  and  atmospheric  vicissi- 
tudes. 

*  Medical  Examinations  for  Life  Insurance,  by  James  Allen, 
M.D.,  LL.D. 


FOR  LIFE  AGENTS.  109 


CHAPTER   XII. 

THE    POLICY-HOLDER. 
The  Agent's  Friend  and  Assistant. 

HAVING  once  insured  a  man  and  delivered  the  policy, 
the  agent  should  make  all  possible  use  of  him  to  get 
more  business.  The  insured  usually  feels  that  he  has 
made  a  good  bargain,  and  is  anxious  that  others  should 
have  the  same  benefits.  The  business  of  life  insurance 
is  such  that  there  is  no  danger  of  a  well-managed  com- 
pany having  too  many  policy-holders,  and  those  who 
are  insured  cannot  monopolize  its  advantages  to  the  de- 
triment of  new  members.  The  agent  should  show  the 
policy-holder  that  his  insurance  will  be  cheaper  and 
that  the  ratio  of  expenses  will  be  lessened  by  having  the 
number  of  members  increased.  The  new  policy-holder 
can  introduce  the  agent  to  his  friends,  and  by  his  exam- 
ple and  presence  can  often  influence  some  of  them  to 
insure.  If  the  agent  is  a  stranger  the  policy-holder  can 
give  him  valuable  information  as  to  what  their  circum- 
stances are,  about  how  large  policies  they  would  proba- 
bly take,  and  what  their  ideas  are  about  life  insurance, 
so  that  the  ground  is  all  mapped  out  beforehand.  The 
agent  should  always  bear  in  mind  that  he  should  take 
advantage  of  every  favorable  opportunity  to  press  the 
claims  of  his  company.  If  the  new  policy-holder  is  a 
well-known,  influential  man,  he  can  be  referred  to  by 
the  agent.  The  fact  that  Mr.  A.  or  B.  has  insured  will 
often  determine  6.  and  D. 

Policies  should  not  be  allowed  to  lapse. 

The  greatest  number  of  policies  lapse  at  the  end  of  or 
during  the  first  year,  and  the  general  experience  of  com- 
panies is. that  the  longer  a  policy  is  kept  in  force,  the 
more  likely  it  will  be,  till  maturity.  Hence  it  is  of 
great  importance  that  the  policy-holder  should  pay  the 
first  three  or  four  premiums  regularly,  and  after  that 
their  continuance  is  tolerably  sure.  The  agent  should 
be  prompt  in  collecting  renewal  premiums,  the  notices 
of  payment  should  be  sent  some  weeks  in  advance,  and 


110  INSTR UOTION  BOOK 

it  may  be  advisable  for  him  to  call  upon  the  policy- 
holder  for  his  premium.  This  is  a  good  opportunity  of 
asking  him  to  take  additional  insurance,  or  inquiring  if 
some  of  his  friends  can  be  persuaded  to  insure.  In 
collecting  premiums  the  agent  should  be  guided  strictly 
by  the  rules  of  the  company,  declining  to  take  one  too 
long  overdue  unless  a  certificate  of  good  health  is 
given.  If  the  insured  is  dissatisfied  with  anything  con- 
nected with  the  company,  care  should  be  taken  to  set 
him  right.  For  this  purpose  the  agent  should  have 
some  printed  statement  of  the  yearly  report  of  the  com- 
pany, or  some  leaflet  of  a  statistical  nature,  adapted  to 
meet  his  case.  Both  officers  and  agents  should  take 
the  greatest  pains  to  keep  the  policies  of  the  company 
in  force.  One  policy  which  lasts  twelve  years  is  much 
better  for  the  company,  and  far  less  expensive,  than  four 
policies  which  last  only  three  years  each.* 

The  officers  of  companies  are  often  greatly  to  blame 
for  the  number  of  lapses  on  their  books ;  their  constant 
cry  is,  "  Get  new  business-,  for  that  is  the  prevailing 
criterion  of  the  prosperity  of  the  company."  It  is  not 
the  new  policies  taken,  whose  first  premiums  are  almost 
wholly  eaten  up  in  commissions  and  expenses,  which 
add  to  the  strength  and  increase  the  assets  of  the  com- 
pany, so  much  as  the  renewals  collected  for  a  series  of 
years  at  a  small  percentage.  In  another  part  of  this 
book  (Chapter  XIII. )  we  have  shown  that  there  is  little 
or  no  benefit  derived  by  the  company  from  the  lapsing 
of  a  policy  during  the  first  two  or  three  years,  but  on 
the  contrary,  a  lapsed  policy  is  a  positive  damage — it 
gives  it  a  bad  reputation  ;  agents  look  at  the  State  re- 
ports and'  see  the  number,  twenty,  thirty,  or  perhaps 
fifty  to  eighty  per  cent,  of  the  new  business  falling 
away;  they  know  that  so  large  a  ratio  of  policies  would 
not  lapse  without  some  good  reason  ;  they  conclude 
that  there  is  dissatisfaction  with  the  dividends,  or  the 
officers  or  agents  have  made  promises  which  have  not 
been  realized. 

To  remedy  this,  a  systematic  effort  should  be  made 
by  every  company  to  find  out  why  each  policy  lapses. 
If  the  company  is  to  blame,  then  this  evil  can  be  cor- 
rected in  the  home  office;  if  the  policy-holder  is  unfor- 
tunate in  his  financial  affairs,  then  he  should  have  an 
extension  of  time,  if  the  case  will  warrant  it.  Compan- 
ies will  find  it  for  their  interest  to  spend  more  time  in 

*  Suppose  a  policy  has  a  premium  of  $100,  and  the  commis- 
sions and  initial  expenses  are  40  and  the  renewals  5  per  cent.  Oue 
policy  kept  in  force  twelve  years  -would  cost  the  company  $95,  but 
four  policies  of  three  years  each  would  cost  $200. 


FOE  LIFE  AGENTS.  Ill 

looking  after  their  old  business,  and  keeping  it  in  force. 
There  are  some  companies  which  have  taken  an  im- 
mense number  of  new  policies  during  the  past  few 
years,  but  their  total  amount  at  risk  and  their  assets 
have  increased  very  little.  If  one  half  the  commissions 
spent  in  procuring  new  policies  had  been  judiciously 
used  in  keeping  the  old  ones  alive,  these  companies 
would  have  had  a  larger  number  in  force,  and  be  in  a 
more  prosperous  condition. 

Too  Much  Insurance  a  Cause  of  Lapse. 

Agents  often  induce  a  man  to  take  more  insurance 
than  he  is  able  to  sustain.  He  pays  the  first  and  per- 
haps the  second  and  third  premium,  and  then  by  some 
reverse  of  fortune  he  finds  that  his  load  is  heavier  than 
he  can  bear.  He  finds  that  he  has  over-estimated  his 
ability  to  pay  the  premiums,  and  now  he  is  in  great 
danger  of  losing  all.  Had  he  taken  two  policies,  each 
for  one  half  the  amount,  he  might  have  obtained  a 
paid-up  policy  or  surrender  value  for  one  and  still  keep 
the  other  in  force.  In  this,  as  in  other  cases,  it  is  for 
the  interest  of  the  agent  to  insure  the  policy-holder  so 
that  he  will  stay  insured. 

Settlement  of  Claims. 

This  is  a  part  of  the  agent's  duty,  and  if  properly 
performed  it  may  be  the  means  of  bringing  him  con- 
siderable business.  When  a  policy-holder  belonging  to 
his  company  dies,  if  residing  within  the  jurisdiction  of 
his  agency,  he  should  lose  no  time  in  having  the 
proofs  of  death  correctly  prepared  and  forwarded  to  the 
home  office.  This  should  be  done  at  the  earliest  con- 
venient date,  for  the  widow  or  friends  of  the  deceased 
seldom  know  the  proper  steps  to  be  taken,  and  the 
claim  will  not  be  paid  till  a  certain  number  of  days  after 
the  proofs  of  death,  prepared  in  a  proper  manner,  are 
sent  to  the  company. 

The  agent  should  take  an  early  opportunity  to  com- 
municate with  the  heirs  of  the  deceased  and  assure 
them  that  they  have  his  sympathy  in  their  affliction 
and  that  he  will  take  the  entire  trouble  and  responsi- 
bility of  collecting  and  paying  over  the  amount  due  on 
the  policy.  An  offer  of  this  kind  can  be  made,  if 
rightly  managed,  without  appearing  officious  or  wound- 
ing the  feelings  of  any  one,  and  the  agent  will  generally 
find  the  friends  of  the  deceased  very  grateful  for  his 
proffered  kindness. 


112  INSTRUCTION  BOOK 

It  is  needless  to  state  that  such  a  course  will  make 
the  agent  favorably  known  in  the  community,  and  that 
the  advantages  of  life  insurance  should  be  pressed  up- 
on all  who  are  disposed  to  listen.  An  opportunity  of 
this  kind,  rightly  improved,  may  be  the  means  of  reap* 
ing  an  annual  harvest  of  premiums  each  equal  to  the 
amount  of  the  claim. 


FOR  LIFE  AGENTS.  113 


CHAPTEK  XIII. 
SURRENDER  VALUES  AND  PAID-UP  POLICIES. 

ONE  of  the  most  fruitful  sources  of  dissatisfaction 
among  policy-holders  at  the  present  day  is  the  disap- 
pointment experienced  in  not  obtaining  from  the  com- 
panies what  they  consider  a  just  and  equitable  surren- 
der value  for  their  policies.  When  the  insured  has 
paid  a  number  of  premiums  on  his  policy,  and  is  un- 
willing or  unable  for  any  reasons  to  keep  it  in  force, 
he  generally  expects  the  company  will  return  to  him  a 
large  part  of  the  amount  which  he  has  paid,  or  convert 
it  into  paid-up  insurance.  Very  few  policy-holders 
stop  to  consider  whether  their  payments  have  been  all 
uash,  or  part  note  or  loan  ;  and  they  think  they  are  just 
as  much  entitled  to  a  liberal  surrender  value  in  the 
latter  case  as  in  the  former.  In  nearly  every  instance 
the  advertising  pamphlets  of  the  company  promise  to 
give  an  "equitable  surrender  value  !'  for  a  policy,  after 
two  or  more  payments  ;  they  represent  that  all  policies 
are  non-forfeitable,  and  agents  in  setting  forth  the 
merits  of  their  companies  are  apt  to  make  more  liberal 
promises  than  their  companies  can  afford  to  fulfill. 

Fire  insurance  companies  have  short-term  rates 
which  are  used  in  computing  the  surrender  value  of  an 
nnexpired  fire  policy,  and  a  property  owner  in  giving 
up  an  nnexpired  policy  of  insurance  on  a  building,  has 
only  to  present  it  to  the  office  and  receive  the  un- 
earned premiums  less  a  surrender  charge.  So  in  life 
insurance,  if  one  is  carrying  an  all  cash  life  or  endow- 
ment policy,  his  ideas  of  equity,  independently  of  what 
the  company  and  its  agents  say,  teach  him  that  there 
is  a  large  part  of  the  premiums  which  he  has  paid  into 
the  company  from  which  he  has  not  received  any  bene- 
fit, and  he  thinks  the  company  is  taking  an  unfair  ad- 
vantage of  his  misfortunes  if  it  does  not  liberally  re- 
spond to  his  request  for  a  surrender  value.  In  some 
instances  these  views  are  correct,  and  it  is  probable 
that  some  companies  do  fail  to  return  to  the  lapsing 
policy-holder  all  the  unearned  premiums  they  can  af- 
ford to,  and  yet  there  is  a  limit  in  this  matter  known 
only  to  each  company,  beyond  which  it  cannot  go  with- 
out damaging  the  interests  of  the  remaining  members, 


114  INSTH UGTION  BOOR 

who  constitute  the  great  majority,  who  pay  their  premi- 
ums promptly,  and  whose  interests  are  equally  entitled 
to  protection. 

In  order  to  enlighten  the  public  and  to  explain  to 
agents  and  the  insured  how  far  a  company  is  justified, 
with  a  due  regard  to  the  remaining  members,  in  pay- 
ing cash  surrender  values  on  policies  which  are  dis- 
continued, we  shall  undertake  a  short  discussion  of  this 
subject. 

We  may  remark  that  our  reasoning  does  not  directly 
apply  to  those  few  companies  which  have  a  clause  in 
their  policies  guaranteeing  to  their  policy-holders  a 
fixed  surrender  value  after  a  certain  number  of  premi- 
ums have  been  paid.  The  insured,  accepting  the  policy, 
accepts  these  conditions,  knowing  just  what  he  can- 
depend  upon,  so  there  is  no  room  for  misunderstand- 
ing. 

Actual  and  Tabular  Cost  of  Insurance. 

And  just  here  we  wish  to  make  some  explanations 
which  the  reader  will  probably  need  in  perusing  this 
chapter.  The  term,  "cost  of  insurance,"  which  is  used, 
means  simply  the  tabular  or  theoretical  cost,  accord- 
ing to  the  mortality  tables  and  rate  of  interest,  and  not 
the  actual  cost  which  the  company  has  to  meet  while 
carrying  a  risk.  To  illustrate  the  difference  between 
these,  a  man  gets  his  house  insured  for  one  year  by 
paying  a  premium  of  $100.  This  is  as  low  as  the  com- 
pany can  afford  and  pay  all  the  working  expenses.  But 
how  is  this  $100  spent  by  the  company  ?  Sixty  dollars 
is  used  in  paying  losses  on  other  buildings ;  this  is  the 
tabular  or  theoretical  "  cost  of  insurance ;"  $30  goes  to 
pay  agents'  commissions  and  office  expenses,  and  $10 
is  the  dividend  or  profit  on  stock.  In  order  to  get  his 
house  insured  the  man  must  pay  $40  more  than  the 
tabular  cost  of  insurance. 

In  life  insurance  there  is  the  same  distinction  be- 
tween the  net  or  tabular  cost  and  the  actual  cost  of  in- 
surance. The  net  cost  is  given  in  the  tables  ;  it  can  be 
computed  to  the  nearest  mill,  but  the  actual  cost  can- 
not be  determined  beforehand  ;  it  includes  the  average 
expense  which  the  company  has  to  bear  in  keeping  the 
company  alive  as  a  working  organization.  A  life  as 
well  as  a  fire  insurance  company  must  incur  expenses, 
such  as  salaries,  office  rent,  commissions,  printing,  etc. , 
and  these  must  come  from  the  policy-holders.  This 
should  not  be  regarded  as  a  hardship  unless  the  expen- 
ses are  extravagant ;  it  is  one  of  the  conditions  of  enjoy- 
ing the  protection  which  the  p  olicy-holder  pays  for. 


FOR  LIFE  AGENTS.  115 


Net  Values  and  Surrender  Values. 

Nor  is  the  "  net  value  "  of  a  policy  the  same  as  the 
"  surrender  value,"  as  will  be  seen  by  the  illustrations 
of  this  chapter.  The  net  value  is  that  part  of  the  pre- 
miums which  the  company  must  have  on  hand  in  order 
to  comply  with  the  State  laws  respecting  solvency,  but 
the  surrender  value  is  what  the  company  can  afford  to 
pay  in  order  to  be  released  from  the  bargain  it  has  made 
with  the  policy-holder,  and  is  usually  somewhat  less 
than  the  tabular  or  net  value. 

Smith,  a  stock  broker,  contracts  with  Brown,  a  banker, 
to  receive  of  the  latter  one  hundred  shares  of  a  certain 
railroad  stock  every  January  1st  for  ten  years  at  65 
cents  on  a  dollar.  But  each  successive  year  the  stock 
falls  two  per  cent.,  and  at  the  end  of  four  years  Smith 
wants  to  be  released  ;  he  has  made  a  bad  bargain  and 
can  get  the  stock  cheaper  elsewhere.  Brown  says, ' '  No, 
the  stock  is  now  at  57,  and  it  will  probably  go  down  to 
45.  If  it  had  taken  an  upward  course  to  73,  I  should 
have  lost  as  much  as  you  have.  I  cannot  let  you  off 
and  return  to  you  the  money  you  have  paid,  unless  I 
deduct  from  it  the  present  value  of  all  the  future  pro- 
fits 1  am  likely  to  make,  that  is,  make  a  surrender 
charge  large  enough  to  save  me  from  loss. " 

Now  substitute  the  word  "policy-holder"  for  Smith, 
and  ' '  life  company  "  for  Brown,  and  ' '  life  insurance  " 
for  railroad  stock,  and  see  how  this  illustration  will 
rea  d.  Policy-holder  agrees  to  pay  a  certain  price  to 
the  company  for  a  definite  amount  of  insurance  for  life 
or  a  series  of  years.  The  man  is  a  "good  risk,"  and 
the  company  has  the  prospect  of  making  the  best  of 
the  bargain.  The  company  sees  that  it  is  going  to  profit 
by  this  policy  and  that  there  are  others  which  will  in 
all  probability  make  them  considerable  loss,  and  there- 
fore the  company  cannot  in  justice  to  the  other  mem- 
bers let  him  off  without  making  him  pay  the  present 
value  of  the  loss  the  rest  would  probably  incur  by  his 
going  out  of  the  company.  If  the  risk  had  been  a  bad 
one  and  a  loss  had  occurred,  the  heirs  of  the  insured 
would  have  gained  nearly  the  whole  amount  of  the  pol- 
icy, and  it  is  unfair  that  the  advantage  should  be  all  on 
one  side.  It  is  evident  then  that  net  value  and  surren- 
render  value  are  two  very  different  things. 

"What  is  a  Policy  of  Life  Insurance  ? 

A  life  insurance  policy  is  a  contract  between  the  as- 
sured and  the  company,  whereby,  in  consideration  of 


116  INSTE UCTION  BOOK. 

certain  representations  made  in  the  application,  and 
which  is  a  part  of  the  contract,  and  in  consideration 
also  of  the  premiums  paid  and  promised  to  be  paid 
thereafter  as  they  may  become  due,  the  company  agrees, 
on  certain  conditions,  to  pay  the  full  amount  of  the 
policy  when  it  becomes  a  claim.  The  fundamental  con- 
dition is  the  payment  of  premiums  when  they  become 
due.  Of  the  two  parties  which  make  a  contract,  the 
party  which  breaks  it  is  the  one  which  should  suffei 
any  damage  or  loss,  especially  when  the  other  party  is 
ready  to  fulfill  its  part  of  the  agreement.  If  the  com- 
pany can  show  that  it  has  been  damaged  by  the  neglect 
or  refusal  of  the  insured  to  pay  the  regular  premium  as 
he  stipulated,  there  is  no  reason  in  law  why  the  injury 
inflicted  on  the  company  should  not  be  made  good.  In 
practice,  however,  the  policy-holder  is  never  called 
upon  to  pay  damages  for  not  keeping  his  policy  in 
force,  for,  except  in  case  of  term  policies,  the  company 
has  a  reserve  or  unearned  portion  of  the  premiums  on 
hand  with  which  it  can  indemnify  itself.  How  far  the 
company  should  take  advantage  of  the  means  in  its 
possession  to  recompense  itself  for  any  loss  it  may  sus- 
tain by  the  lapsing  of  a  policy,  is  a  topic  which  will  be 
considered  hereafter. 


Payment    of  Surrender    Values    now   generally 
adopted. 

The  idea  of  paying  surrender  values  is  comparatively 
a  modern  one.  It  is  not  many  years  since  the  great  Dr. 
Farr  of  England  proposed  a  scheme  in  which  every  po- 
licy-holder in  a  certain  company  should  be  at  liberty  to 
reclaim  at  any  moment  a  certain  portion  of  the  premi- 
ums he  had  paid  on  a  policy.  Previous  to  this  time,  as 
in  a  few  companies  at  the  present  day,  the  failure  to 
pay  the  premium  on  the  day  specified,  caused  an  en- 
tire forfeiture  of  the  policy.  In  the  year  1861,  Hon. 
Elizur  "Wright  succeeded  in  getting  his  celebrated  non- 
forfeiture law  through  the  Massachusetts  legislature, 
and  although  this  does  not  provide  for  a  cash  surrender 
value,  it  compels  the  companies  of  that  State  to  con- 
tinue the  policy  in  force  as  a  paid-up  temporary  insur- 
ance as  long  as  four  fifths  of  the  reserve  will  sustain  it, 
the  policy  being  subject  to  the  diminution  of  the  un- 
paid premiums  in  case  of  death  before  the  temporary 
insurance  expires.  Since  the  time  when  this  law  was 
passed,  there  has  been  a  general  understanding  among 
the  companies  that  the  policy-holder  is  entitled  to  a 
surrender  value,  provided  there  is  any  cash  reserve  left 
after  making  a  sufficient  surrender  charge. 


FOR  LIFE  AGENTS.  Ill 

No  company  would  dare  to  advertise  itself  now  a9 
never  paying  a  surrender  value  when  a  policy  lapses , 
for  the  intelligent  public  know  perfectly  well  that  one 
should  be  given  if  the  company  can  afford  it.  In  the 
case  of  "tontine  dividend  policies,"  this  feature  is  ex- 
pressly waived. 

In  deciding  what  surrender  value  should  be  paid  on 
a  policy,  every  company  is  a  law  unto  itself,  just  as 
much  as  in  the  regulation  of  the  annual  premiums. 
Hardly  any  two  companies  have  the  same  rules  for  de- 
termining the  surrender  value,  and  there  are  but  few 
in  which  there  is  any  fixed  standard  of  computing  it. 
Taking  up  the  New  York  Insurance  Eeport  for  1868, 
we  find  the  following  replies  to  question  ninth,  which 
reads  thus  :  ' '  What  proportion  of  the  net  present  value 
of  a  policy  (calculated  on  the  company's  assumptions 
of  mortality  and  interest)  is  given  as  a  surrender 
value  ?"  The  replies  of  most  of  the  New  York  compa- 
nies are  such  as  these  :  "No  fixed  rule  as  yet  ;"  "  Sev- 
enty-five percent.  ;"  "Usually  from  seventy-five  per 
cent,  to  the  whole  ;"  "  About  the  face  ;"  "  Thirty- 
three  to  seventy-five  per  cent.  ;"  "  The  whole  less  a 
margin  for  expenses  ;"  "  One-half;"  "Variable  ;"  "  Dis- 
cretionary ;"  "Varied  by  circumstances;"  "Variable 
but  equitable,"  and  so  forth. 

The  argument  which  is  relied  upon  to  justify  the 
making  of  a  surrender  charge  of  one  third  or  one 
fourth  of  the  reserve  is  that  the  payment  of  a  surrender 
value  and  the  lapsing  of  premiums  withdraws  the  funds 
of  the  company  which  would  be  available  in  the  pay- 
ment of  losses,  and  diminishes  its  future  profits.  The 
payment  of  claims  when  they  occur  is  the  legitimate 
business  of  a  company;  all  other  things,  such  as  divi- 
dends and  surrender  values,  are  merely  subsidiary 
matters.  Until  the  discovery  and  general  adoption  of 
a  better  rule  for  a  surrender  charge,  this  one  of  a  per- 
centage on  the  reserves  will  be  the  one  generally 
adopted.  While  accepting  this  rule  in  the  following 
illustrations,  we  do  not  indorse  its  want  of  equity  or 
its  injustice  in  making  the  policy-holder  pay  the  more 
for  a  surrender  charge  the  longer  he  remains  in  the 
company.  On  the  principle  that  the  company  should 
charge  enough  to  pay  the  expense  of  obtaining  another 
equally  good  risk,  it  would  seem  that  the  longer  the 
policy-holder  paid  his  premiums  and  the  more  the 
danger  of  death  increased,  the  easier  the  company 
should  be  in  letting  him  off;  but  that  view,  we  are  sor- 
ry to  say,  is  not  generally  entertained.  No  just  and 
feasible  method  of  computing  surrender  values  has 


118  IN8TR UGTION  BOOK 

come  into  general  use,  and  there  is  hardly  anything  in 
the  management  of  companies  about  which  there  is  a 
greater  want  of  harmony  than  this. 

It  is  easy  to  see,  from  the  list  of  answers  given  above, 
that  the  officers  of  every  company  either  adopt  their 
own  rules  for  determining  the  surrender  value  of  poli- 
cies or  decide  upon  the  merits  of  each  case,  and  yet  in 
justice  to  them  it  is  proper  to  add  here  that  the  sur- 
render value  is  often  modified  very  much  by  the  condi- 
tion of  the  insured  :  if  he  is  in  poor  health,  (the  kind 
•which  are  not  apt  to  allow  their  policies  to  lapse, )  then 
the  company  can  afford  to  give  a  larger  surrender  value, 
in  order  to  avoid  paying  the  full  amount  of  the  policy 
in  the  probable  event  of  death,  than  if  his  physical 
condition  were  perfectly  sound.  When  a  man  of  ro- 
bust health  is  insured  for  life  or  a  term  of  years  in  a 
company,  he  is  expected  to  contribute  his  share  to  pay 
the  expenses  and  the  losses  which  are  continually  oc- 
curring, and  in  this  manner  he  pays  for  the  protection 
which  he  enjoys.  If  he  fails  to  pay  his  premiums,  the 
company  does  not  obtain  what  it  would  have  gained 
had  he  remained  faithful  to  his  contract,  and  besides,  it 
incurs  an  increased  ratio  of  mortality . 


"Why  Companies  cannot  pay  the  Whole  of  the  Re- 
serve as  a  Surrender  Value. 

Suppose  a  company  consisted  of  two  thousand  mem- 
bers, and  on  a  certain  day,  after  the  policies  had  been 
in  force  a  few  years,  one  thousand  of  them,  the  health- 
iest and  soundest,  should  demand  and  receive  the  full 
amount  of  reserves  and  dividends  declared  thereon  as 
surrender  values,  it  is  plain  that  such  a  course  would 
greatly  increase  the  future  average  mortality  of  the 
company.  When  these  persons  insured  they  openly  or 
tacitly  agreed  to  abide  by  the  company  till  their  poli- 
cies became  claims ;  their  retirement  has  injuriously  af- 
fected the  interests  of  the  persistent  members,  and  in 
order  to  do  justice  to  all  parties,  it  will  be  necessary  for 
the  company  to  retain  so  much  of  the  reserve  as  will 
indemnify  it  for  the  increased  rate  of  mortality  occa- 
sioned by  their  leaving  the  company.  If  the  ratio  of 
mortality  to  the  assets  is  increased  by  paying  the  full 
amount  of  the  reserve  as  a  surrender  value,  it  is  certain 
that  the  result  will  be  felt  in  the  decreased  dividends 
or  return  surplus  to  the  remaining  policy-holders.  Noth- 
ing is  plainer  in  life  assurance  than  if  the  insured  want 
extensive  privileges,  and  permission  to  go  and  come 
when  they  please,  they  must  pay  for  these  advantages. 


FOR  LIFE  AGENTS.  119 

The  so-called  "  liberal  features,"  and  a  generous  dispo- 
sition on  the  part  of  a  company  to  favor  those  who  with- 
draw, means  nothing  else  than  taking  Peter's  money  to 
pay  for  accommodating  Paul.  It  is  stated  on  good  au- 
thority that  some  English  companies,  which  have  been 
extra  liberal  in  paying  surrender  values,  have  been  com- 
pelled to  refrain  from  distributing  any  surplus  for  sev- 
eral years,  although  their  investments  have  yielded  a 
larger  rate  of  interest  than  was  assumed  in  the  com- 
putation of  the  premiums. 

Suppose  we  have  two  policy-holders  insured  for 
$1,000  each  on  the  whole  life  plan,  and  each  at  thirty- 
four  years  of  age,  and  that  the  vitali ty  and  health  of  one 
of  them  is  one  fourth  greater  than  the  average,  that  is, 
while  the  average  expectation  of  life  at  this  age  is  thirty- 
two  years,  the  healthiest  one  has  a  fair  prospect  of  liv- 
ing forty  years  ;  then  he  would  be  expected  to  pay 
eight  more  premiums  on  his  policy,  and  the  payment 
of  his  claim  would  be  deferred  for  eight  years.  At  the 
end  of  two  years  both  policies  lapse.  The  present 
value  of  these  eight  future  premiums  expected  from  the 
latter  policy-holder  at  four  per  cent,  discount,  and  at 
the  date  of  the  lapsing  of  his  policy,  would  be  $38.37 . 
But  if  the  payment  of  the  claim  of  $1 ,000  is  postponed 
eight  years,  the  present  value  of  the  annnal  interest  of 
$70  for  eight  years,  computed  at  seven  per  cent. ,  would 
be  $49. 76,  making  a  loss  to  the  company  on  this  policy 
of  $86.33.  In  the  other  case,  where  the  insured  was  of 
only  average  health  and  vitality,  we  have  supposed  that 
the  company  would  not  have  lost  or  made  anything.  If 
the  excess  of  vitality  in  the  healthier  person  was  only 
four  years,  the  loss  to  the  company  by  lapse  would  be 
$47.89.  Now  the  company  having  insured  these  men 
of  more  than  average  vitality,  is  entitled  to  all  that  can 
be  gained,  else  how  could  it  pay  the  early  losses  ?  Is  it 
not  clear  then  that  a  lapsing  policy-holder,  if  in  good 
health,  would  throw  an  additional  burden  upon  the 
rest  if  he  should  be  permitted  to  withdraw  the  whole 
of  his  reserve  as  a  surrender  value  ? 

^   Practical  Illustrations. 

In  ordyto  illustrate  this  subject  more  intelligently, 
and  to  show  how  far  a  company  is  justified  in  paying 
a  surrender  value,  let  us  examine  the  nature  of  a  pre- 
mium and  its  relation  to  the  insured. 

A  man  aged  forty  insures  on  the  ordinary  life  plan  for  $1,000. 
the  office  premium  is  $31.30,  the  net  annual  premium  according 
to  the  combined  experience  table  of  mortality,  and  four  per  cent. 


120  INSTRUCTION  BOOK 

Interest,  is  $23.68.    For  the  first  three  years  the  reserve  interest 
&nd  cost  of  insurance  will  be  as  follows  ; 

FIBST  TEAR— Net  premium $23.68 

Interest  four  per  cent.       ...          .94 


$24.62 
Cost  of  Insurance, 10.21 


Reserve, $14.41 

SECOND  YEAB— Net  premium 23.68 


$38.09 
Interest  four  per  cent.,    .    .     .        1.52 


$39.61 
Cost  of  Insurance,     ....      10.30 


Reserve, $29.31 

THIBD  YEAB— Net  premium 23.68 


$52.99 
Interest, 2.12 


$55.11 
Cost  of  Insurance,      ....      10.41 


Reserve, $44.70 

Here  are  $44. 70  of  unearned  premiums  in  the  hands 
of  the  company.  There  is  also  the  loading  31.30  — 
23.68  =  7.62,  and  this  for  three  years  is  $22.86.  This 
item  is  left  out  of  consideration,  as  it  is  used  for  defray- 
ing expenses  and  returned  as  surplus. 

We  have  already  shown  that  if  the  insured  has  more 
than  average  vitality  the  whole  of  the  reserve  cannot  be 
paid  as  a  surrender  value  without  affecting  the  interests 
of  the  remaining  policy-holders,  and  that  the  damage 
done  to  the  company  by  the  lapsing  of  a  policy  amounts 
to  about  eleven  or  twelve  dollars  for  every  year  which 
he  would  have  lived  longer  than  the  average  of  policy- 
holders.  Suppose  that  75  per  cent,  of  the  reserve  is 
the  rule  adopted  by  the  company,  it  will  amount  in 
this  case  to  $33.53,  leaving  $11. 17  to  recompense  the 
company  for  what  it  has  lost. 

There  is  another  source  of  loss  which  we  have  not 
alluded  to — what  the  company  would  have  gained  from 
the  insured  toward  paying  the  expenses  of  the  com- 
pany other  than  the  commissions.  Reckoning  one  per 
cent,  on  the  gross  premiums  as  the  amount  he  would 
have  contributed  toward  meeting  the  general  expen- 
ses of  the  company  we  have  another  item  of  $4.81. 
Putting  both  of  these  items  together,  we  see  very 
clearly  that  a  company  cannot  pay  the  entire  reserve  as 
a  surrender  value  without  infringing  upon  the  interests 
of  the  remaining  members. 


FOR  LIFE  AGENTS. 


121 


Why  Companies  cannot  pay  a  Surrender  Value  at 
the  End  of  the  First  Year. 

Many  persons  are  disposed  to  criticise  the  conduct 
of  life  insurance  companies  because  they  do  not  pay 
surrender  values  at  the  end  of  the  first  year  of  a  policy. 
It  is  easy  to  illustrate  why  this  is  practically  impossi- 
ble, except  in  case  of  short-term  endowments  and  ten- 
premium  life  policies. 

Ordinary  life  policy  issued  at  40,  for  $1,000,  premium  $31.30. 

Dr. 

Gross  premium 

Commissions  25  per  cent.  .    .    .     $7.82 
Medical  examination  and  office  expenses  10.00 


Or. 
$31.30 


Interest  6  per  cent. 


Cost  of  insurance 


Surrender  charge  of  25  per  cent,  of  reserve 
Balance  in  the  hands  of  the  company 


$13.48 
.81 

$14.29 
10.21 

$4.08 
3.60 

.48 


The  surrender  charge  of  25  per  cent,  on  the  reserve 
is  as  low  as  the  most  liberal  companies  adopt,  many  com- 
panies charging  50  per  cent.,  and  the  item  for  medical 
examination  and  office  expenses  is  as  low  as  the  expe- 
rience of  the  most  prosperous  and  economical  compan- 
ies will  justify.  It  is  clear  from  this  illustration  that 
there  is  no  money  made  by  the  company  on  a  whole 
life  policy  which  lapses  at  the  end  of  the  first  year. 


SECOND  YEAB — Gross  premium  .  . 
Commissions  five  per  cent.  . 
Balance  previous  year  .  .  . 

Cash  at  beginning  of  the  year. 
Interest  at  six  per  cent  .    .    . 


Dr. 

$31.30 
1.56 


Cost  of  insurance 


Cash  on  hand 

Surrender  charge  25  per  cent,  of  reserve 

Surrender  value 

Which  is  about  62  per  cent,  of  the  reserve. 


.THIRD  YEAR— Gross  premium.  . 
Commissions  five  per  cent. 
Balance  previous  year  .  . 


Dr. 

$31.30 
1.56 


Or. 

$29.74 
4.08 

$33.82 
2.03 

$35.85 
10.30 

$25.55 
7.32 

$18.23 


Cr. 

$29.74 
25.55 


Amount 


$55.29 


122 


INSTRUCTION  BOOK 


Amount — (continued  from  last  page) 
Interest  six  per  cent 


$55.29 
3.31 


$58.60 
Cost  of  Insurance 10.41 

Cash  on  hand $48.19 

Surrender  charge 11.17 

Surrender  value 37.02 

Suppose  40  per  cent,  credit  to  be  given  by  the  com- 
pany on  the  premium  the  statement  will  be  as  follows  : 

Dr.  Or. 

FIBST  YEAB — Gross  premium,     .    .    .  $31.30 

Credit  40  per  cent $12.52 

Commission, 7.82 

Medical  ex.  and  office  expenses,     $10.00 

Interest  on  note,  six  per  cent.    .  .75 

$30.34  $32.05 

Difference $1.71 

Interest,        .10 

Cr.  end  of  the  year,    ....  $1.81 

Cost  of  Insurance, 10.21 

Balance  against  the  company,     .        8.40 
Surrender  charge,      .....         3.60 

Deficiency, $12.00 

SECOND  YEAK — Gross  premium,    .    .  $31.30 

Credit  40  per  cent.,    -    ....  $12.52 

Commissions  five  per  cent.,    .    .  1.56 

Balance  against  the  company,    .  8.40 

Interest  on  two  notes 1.50 

$22.48  $32.80 

$10.32 
Interest .62 

Cash  beginning  of  year,      .     .     .  $10.92 

Cost  of  insurance, $10.30 

Cash  on  hand,  end  of  year      .    .  .62 

Surrender  charge, 7.33 

Deficiency 6.71 

.THIRD  YEAK — Gross  premium,    .    .    .  $31.30 

Credit  four  per  cent.,    ....     $12.52 

Commissions 1.56 

Balance  last  year, .62 

$14.08  $31.92 

Cash  beginning  of  year.    ,    .    .  $17.84 

Interest  on  reserves 1.07 

Interest  on  three  notes,     .    .    .  2.25 

$21.16 

Cost  of  Insurance, $10.41 

Cash  on  hand, 10.75 

Surrender  charge, 11.17 

Deficiency, .42 


FOR  LIFE  AGENTS.  123 

It  is  clear  from  these  last  illustrations  that  parties  in- 
sured, who  have  received  credit  for  a  large  part  of  their 
premiums,  cannot  reasonably  expect  any  surrender 
value  in  cash  for  their  whole  life  policies. 

The  relation  which  a  premium  note  or  loan  holds  to 
the  policy  is  not  generally  understood  by  the  insured 
when  he  wants  a  surrender  value.  After  paying  seve- 
ral premiums,  one  half  or  40  per  cent,  on  credit,  the 
policy-holder  concludes  he  will  get  the  surrender  value 
of  his  policy  and  give  it  up.  He  writes  to  the  com- 
pany or  its  agent  and  is  informed  that  there  is  no  sur- 
render value  in  excess  of  the  notes  or  loans  on  the  pol- 
icy. He  instantly  concludes  that  he  has  been  swin- 
dled ;  that  life  insurance  companies  were  made  for  the 
purpose  of  receiving  and  not  paying  out  money,  and 
perhaps  he  takes  his  revenge  by  denouncing  the  com- 
pany through  the  press.  He  does  not  know  that  by 
paying  only  one  half  or  sixty  per  cent,  cash  he  has  ob- 
tained his  insurance  at  just  about  the  actual  cost — per- 
haps a  trifle  below  it  ;  that  the  notes  given  for  premi- 
ums represent  the  reserve,  good  as  an  investment  and 
as  an  interest-bearing  asset,  although  they  are  of  no 
use  to  pay  the  losses  of  another  policy-holder,  and  so 
in  fact  the  company  has  been  loaning  him  the  money 
represented  by  these  notes,  and  that  all  this  time  he 
has  been  in  debt  to  the  company  to  the  amount  of 
these  notes. 

This  is  not  intended  as  a  defense  of  the  note  or  loan 
system  ;  it  is  simply  an  explanation  of  what  it  is.  A 
good  thing  misunderstood  is  often  no  better  than  a  bad 
thing  understood.  If  the  policy-holder  will  only  bear 
in  mind  that  the  note  or  loan  is  so  much  of  the  final 
payment  of  the  policy,  whether  surrender  value,  paid-up 
insurance,  or  death  claim,  and  advanced  by  the  com- 
pany to  the  insured,  the  rest  will  be  perfectly  clear. 

This  view  of  the  subject  also  shows  us  why  it  is 
necessary  to  have  the  policy-holder  keep  up  the  pay- 
ment of  the  interest  oil  the  notes  of  a  paid-up  policy 
until  they  are  cancelled  by  dividends  if  any  are  al- 
lowed. 

Ten  Annual  Life  and  Endowment  Policies. 

Surrender  values  are  not  so  frequently  demanded  on 
these  classes  of  policies,  for  the  reason  that  paid-up 
policies  are  usually  given  after  two  annual  payments 
have  been  made.  In  a  paid-up  policy  the  insured 
knows  he  gets  a  definite  amount  of  insurance  for  his 
money,  but  in  accepting  a  promise  of  asurrender  value 
he  is  not  so  certain. 


124 


IN8TR UCTION  BOOK 


As  a  much  larger  premium  is  required  on  this  class 
of  policies  it  is  more  likely  that  they  will  have  a  surren- 
der value  at  the  end  of  the  first  year,  especially  in  short 
term  endowments. 

Ten  Annual  Life  Policy—  Age  40—  $1,000. 

Dr.  Or. 

FIBST  YEAH  —  Gross  premium,      .    .    .  $59.09 

Commission  25  per  cent,    .    .    $14.77 
Med.  ex.  and  office  expenses,      .       10.00  24.77 

$34.32 
Interest  six  per  cent,     ....  2.06 

$36.38 
Cost  of  insurance,      .....         9.95 

Cash  on  hand,     ......  26.43 

Surrender  charge,    .....        9.82 

Surrender  value,      .....  16.61 

Three  fourths  of  the  reserve  is  $29.45. 
SECOND  YEAR—  Gross  premium,  .    .    .  $59.09 

Commissions  five  per  cent.,   .    .      $2.95 
Cash  on  hand  last  year,         .    .  26.43 

$2.95  $85.52 

Balance,  ,    ........  82.57 

Interest  six  per  cent.,  ....  4.95 

$87.62 
Cost  of  insurance,    .....        9.76 

Cash  on  hand,  .......  $77.76 

Surrender  charge,      .....       20.07 

Surrender  value,  ......  $57.69 

Three  fourths  of  the  reserve  is  $60.22. 
THIRD  YEAB  —  Gross  premium     .    .    .  $59.09 

Commissions,  5  per  cent.    .    .    .     $2.95 

Cash  on  hand  last  year  ....  77.76 

$2.95          $136.85 
Balance     .......    .    .  133.90 

Interest  six  per  cent  .....  8.03 

$141.93 
Cost  of  insurance  ......      9.65 

Cash  on  hand     .......  132.38 

Surrender  charge  ......     30.80 

Surrender  value     ......  $101.58 

Three  fourths  of  the  reserve  is  $92.10. 

The  same  with  40  per  Cent.  Credit  given. 

Dr.  Or. 

FIEST  YEAB—  Gross  premium  ....  $59.09 

Credit  40  per  cent  ......  $23.64 

Commissions  25  per  cent      .    .     14.77 
Medical  examination,  etc.  .    .    .     10.00 

Interest  on  note  in  advance,  six  per  cent  1.42 


$48.41 


$60.61 


Balance 


FOR  LIFE  AGENTS. 


125 


Balance—  (continued  from  last  page,)  $12.10 

Interest     .........  »73 

Credit  end  of  the  year    ....  12.83 

Cost  of  insurance  ......      9.95 

Cash  on  hand    .......  2.88 

Surrender  charge  ......      9.82 

Deficiency    ........      6.94 

Three  fourths  of  the  reserve  would  be  $29.45. 

SECOND  YEAB  —  Gross  premium  .    .    .  $59.09 

Credit  four  per  cent  .....  $23.64 
Commissions  five  per  cent.  .  .  2.95 
Interest  on  two  notes  in  advance  2.84 

Cash  on  hand  last  year  ....  2.88 

$26.59  $64.81 

Balance  ..........  38.22 

Interest  six  per  cent  ......  2.29 

Credit  end  of  the  year    ....  $40.51 

Cost  of  insurance  ......      9.76 

Cash  on  hand   .......  $30.75 

Surrender  charge  ......    20.07 

Surrender  value     ......  10.68 

THIRD  YEAB—  Gross  premium  ....  $59.09 

Credit  40  per  cent  ......    .  $23.64 

Commissions  ........       2.95 

Interest  on  three  notes  in  advance  4.26 

Cash  on  hand  last  year  ....  30.75 

$26.59  $94.10 

Balance  ..........  67.51 

Interest  six  per  cent  ......  4.05 

Credit  end  of  the  year    ....  71.56 

Cost  of  insurance  ......      9.55 

Cash  on  hand    .......  62.01 

Surrender  charge  ......    30.80 

Surrender  value    ......  31.21 

In  the  case  of  a  ten  year  life  policy,  after  two  annual 
premiums  have  been  paid,  the  company  generally 
agrees  to  give  a  paid-up  life  policy  of  $200  on  a  policy 
of  $1,000.  This  at  the  age  42  would  demand  a  single 
net  premium  (Combined  Experience  four  per  cent.)  of 
$79.84,  or  a  mutual  premium  of  $87.82,  while  all  the 
money  the  company  has  to  meet  this,  according  to  the 
above  calculations  and  without  deducting  the  surren- 
der charge,  is  $76.48.  After  three  annual  payments 
we  have  the  single  net  premium  of  $300  =  $122.61,  and 
a  mutual  rate  is  $134.87,  while  the  cash  on  hand  to 
meet  this  obligation  is  $130.45. 

In  these  cases  the  company  is  as  much  entitled  to 
a  surrender  charge  as  when  paving  cash  surrender 
values. 

From  these  illustrations  it  is  easy  to  see  that  the 
company  does  not  make  anything  in  this  class  during 
the  first  three  years,  by  giving  paid-up  policies  of  as 


126 


INSTRUCTION  BOOK 


many  hundred  dollars  as  there  nave  been  premiums 
paid  on  a  policy  of  $1,000.  In  fact  it  is  a  loss  to 
the  company,  while,  like  many  other  features,  it  is  sub- 
mitted to  in  order  to  promote  a  feeling  of  confidence 
and  satisfaction  among  the  retiring  members. 

Ten  Year  Endowment— Age  40— $1,000. 

Dr.  Or. 

FIBST  YEAH— Gross  premium,    .    .    ,  $106.90 

Commission  25  per  cent.,    .    .    $26.73 
Medical  examination,  etc.,      .    .       10.00 


$36.73 


Interest  six  per  cent., 


70.17 
4.21 


Credit  end  of  the  year,       .    .    .  $74.38 

Cost  of  insurance, 9.64 

Cash  on  hand  end  of  the  year,    .  64.84 

Surrender  charge, 19.92 

Surrender  value 44.92 

Which  is  about  56  per  cent,  of  the  reserve. 
SECOND  YEAH— Gross  premium,     .    .  $106.90 

Commissions  five  per  cent.,    .    .    $5.35 
Cash  on  hand  last  year,    ....  64.84 

$5.35         $171.74 

Balance, 166.39 

Interest  six  per  cent.,    ....  9.98 

Credit  end  of  the  year,  ....  $176.37 

Cost  of  insurance, 8.88 

Cash  on  hand $167.49 

Surrender  charge, 40.79 

Surrender  value, 126.70 

Three  fourths  of  the  reserve  is  $122.37. 
THIRD  YEAR — Gross  premium.    .    .    .  $106.90 

Commission  . $5.35 

Cash  on  hand  last  year   ....  167.49 

$5.35  $274.39 

Balance 269.04 

Interest  six  per  cent 16.14 

Credit  eud  of  the  year    ....  $285.18 

Cost  of  insurance 8.16 

Cash  on  hand  end  of  the  year.    .  $277.02 

Surrender  charge 62.68 

Surrender  value 214.34 

Three  fourths  of  the  reserve  is  $188.04. 

Ten  Year  Endowment,  40  per  cent,  credit. 

Dr.  Or. 

FIBST  YEAR— Gross  premium  ....  $106.90 

Credit  40  per  cent $42.76 

Commissions 26.73 

Medical  examination  and  expenses  10.00 

Interest  on  note  in  advance    .    .  2.56 


$79.49  $109.46 


FOR  LIFE  AGENTS. 


127 


(Continued  from  last  page.) 

Dr.  Or. 

Balance $29.97 

Interest  6  per  cent.    .....  1-80 

Credit  end  of  the  year    ....  $31.77 

Cost  of  insurance 9.64 

Cash  on  hand 22.23 

Surrender  charge 19.92 

Surrender  value 2.31 

BKOOND  YEAB— Gross  premium   .    .    .  $106.90 

Credit $42.76 

Commission 6.35 

Interest  on  two  notes  in  advance  6.12 

Cash  on  hand  last  year  ....  22.23 

$48.11          $134.26 

Balance 86  14 

Interest 5J.7 

Credit  end  of  the  year    ....  $91.31 

Cost  of  insurance 8.88 

Cash  on  hand $82.43 

Surrender  charge 40.79 

Surrender  value 41.64 

THIRD  TEAE— Gross  premium ....  $106.90 

Credit 42.76 

Commission 6.36 

Interest  on  three  notes  in  advance  7.68 

Cash  on  hand  last  year  ....  82.43 

$48.11          $197.01 

Balance 148.90 

Interest  six  per  cent. 8.93 

Credit  end  of  the  year    ....  $167.84 

Cost  of  insurance 8.16 

Cash  on  hand 149.67 

Surrender  charge 62.68 

Surrender  value 86.99 

In  all  the  above  computations  we  have  made  the  case 
as  favorable  as  possible  to  the  policy-holder,  and  if  we 
have  erred  at  all,  it  has  been  against  the  companies.  In 
more  than  three  fourths  of  the  companies  we  will  ven- 
ture to  say  that  the  usual  annual  and  initial  expenses 
of  a  policy  are  much  greater  than  are  here  represented. 
It  will  also  be  noticed  that  we  have  made  no  charge 
except  the  commissions  for  keeping  a  policy  in  force 
after  it  is  once  issued.  The  actual  cost  of  insurance 
varies  so  much  in  different  companies,  that  we  have 
taken  only  the  tabular  cost. 

In  giving  a  paid-up  policy  for  $200  on  a  ten  year  en- 
dowment of  $1,000,  after  two  annual  premiums  have 
been  paid,  we  have  the  net  single  premium  for  $200  = 
$139.68,  and  on  the  mutual  rate,  $153.65.  The  amount 
of  cash  on  hand,  according  to  the  above  assumptions, 


128  INSTRUCTION  BOOK 

leaving  out  the  surrender  charge,  is  $166.35.  The  third 
year  the  net  single  premium  for  $300  is  $230.40,  and 
the  mutual  rate  is  $253.44;  the  amount  of  cash  on  hand 
to  meet  this  is  $275.32.  It  is  only  by  ignoring  the  sur- 
render charge  that  the  company  can  afford  to  give 
paid-up  policies  in  this  manner. 


Little  Gained  by  Lapsed  Policies. 

In  investigating  this  subject  we  must  conclude  that 
the  companies  actually  lose  money  on  the  aggregate  of 
all  cash  policies  which  lapse  during  the  first  year.  In 
the  lapse  of  half  note  or  part  loan  policies  the  loss  can- 
not be  doubted.  It  is  questionable  whether  they  ac- 
tually gain  anything  on  the  aggregate  of  those  which 
lapse  during  the  second  and  third  years,  for  in  all  lim- 
ited term  policies  where  the  reserve  is  the  greatest, 
paid-up  insurance  is  generally  preferred  to  lapse  or 
surrender  values.  It  is  perfectly  safe  to  say  that,  as  a 
general  rule,  a  compaiiy  gains  more  when  the  policy  is 
kept  in  force,  than  by  paying  three  fourths  or  two 
thirds  of  the  reserve  as  a  surrender  value. 

In  conclusion,  we  would  desire  every  agent  to  say  : 
"  Avoid  asking  for  a  cash  surrender  value  on  your  policy 
if  you  can  possibly  help  it,  unless  the  amount  to  be  paid 
is  distinctly  stated  in  the  policy."  It  is  probable  that 
not  one  man  in  a  hundred  who  takes  a  surrender  value 
for  his  policy  ever  thinks  he  is  justly  treated,  when  the 
value  is  left  to  be  determined  at  the  discretion  of  the 
officers  of  the  company,  and  he  accepts  what  he  can 
get  with  the  resolution  never  to  be  caught  again.  And 
we  caution  our  readers  against  a  temptation  to  which 
many  policy-holders  are  exposed — that  of  applying  for 
a  surrender  value  on  a  policy  already  in  force,  in  order 
to  allow  an  agent  to  transfer  them  to  another  company, 
unless  the  one  they  are  already  insured  in  is  totally  un- 
worthy of  confidence. 

To  agents  and  solicitors  we  again  say,  counsel  your 
clients  to  have  as  little  to  do  with  surrender  values  as 
possible.  This  is  not  a  legitimate  part  of  insurance, 
and  should  not  be  made  an  inducement  for  one  to  take 
a  policy  unless  the  company  guarantees  a  specific  sur- 
render value,  and  in  all  cases  give  little  or  no  encour- 
agement for  one  if  the  party  proposes  to  take  a  part 
loan  or  note  on  his  premium. 

In  this  examination  of  the  subject  we  have  endeav- 
ored to  give  such  information  as  will  dissuade  many  a 
policy-holder  from  applying  for  a  cash  surrender  value 
on  his  policy,  or  if  it  is  absolutely  necessary,  we  have 


FOR  LIFE  AGENTS.  129 

endeavored  to  prevent  them  from  being  disappointed 
and  from  making  unjust  charges  of  extortion  against 
the  companies  when  they  do  not  receive  all  they  ex- 
pected. When  life  insurance  becomes  better  under- 
stood, and  the  people  at  large  know  what  they  can  rea- 
sonably expect  of  a  company,  and  how  to  distinguish 
the  highly  colored  statements  of  interested  agents  from 
the  sober  reality  of  this  complicated  kind  of  business, 
then  it  will  be  better  appreciated,  and  the  disappoint- 
ment about  surrender  values  will  be  comparatively  un- 
known. 


130  LN8TR UOTION  BOOK. 


CHAPTER  XIV. 

DISTRIBUTION  OP  SUBPLUS. 

It  is  highly  important  that  the  agent  should  clearly 
understand  this  subject  in  order  that  he  may  correctly 
explain  it  when  necessary,  and  especially  that  he  may 
» avoid  making  statements  and  promises  which  cannot 
possibly  be  realized.  The  public  know  little  or  nothing 
about  the  methods  adopted  in  distributing  dividends, 
and  on  this  as  well  as  many  other  points  in  life  insurance 
they  depend  almost  entirely  on  the  agents  for  informa- 
tion. 

Premiums. 

The  company  adopts  a  table  of  net  premium  rates 
for  policies  of  $1,000,  according  to  certain  arbitrary 
standards  of  mortality  and  interest  which  long  experi- 
ence and  attentive  observation  have  shown  to  be  safe 
and  trustworthy.  In  the  table  of  mortality  it  is  assumed 
that  out  of  100,000  persons  living  at  the  age  of  ten 
years,  a  certain  number  will  die  at  each  succeeding  age 
up  to  ninety-five  or  ninety-nine,  or  the  oldest  age  in  the 
table.  A  rate  of  interest  is  assumed  low  enough  to  cover 
all  probable  fluctuations  in  the  value  of  money,  and 
which  it  is  supposed  that  the  invested  reserves  of  the 
company  will  yield  without  question.  The  "net  pre- 
mium "  is  what  it  would  cost  to  insure  each  one  of  the 
whole  number  of  lives  in  a  class  of  a  given  age,  provid- 
ed there  were  no  excess  or  deficiency  of  mortality  or 
interest,  and  no  expenses  to  be  incurred.  But  neither 
the  future  mortality,  interest  nor  expenses  of  the  com- 
pany can  be  predicated  with  any  certainty.  The  com- 
pany can  make  a  careful  selection  of  risks  so  as  to  keep 
the  mortality  within  tabular  limits  ;  it  can  invest  the 
assets  at  as  high  a  rate  of  interest  as  is  consistent  with 
safety  ;  it  can  keep  the  expenses  down  within  proper 
bounds  while  using  all  due  energy  in  prosecuting  the 
business  ;  and  then,  if  there  is  any  surplus  left  at  the 
end  of  the  year,  it  can  distribute  it  among  the  policy- 
holders. 

Mortality. 

If  no.  deaths  should  take  place  among  the  members 
of  a  company  ia  any  given  year  there  would  be  no 


FOR  LIFE  AGENTS.  131 

losses  to  pay,  but  it  would  not  do  to  distribute  the  ap- 
parent gains  as  surplus.  This  might  do  in  a  fire  insur- 
ance company  where  the  policies  are  renewed  from 
year  to  year,  but  in  a  life  company,  if  the  actual  losses 
were  $100,000  less  than  the  expected  or  tabular  mor- 
tality, this  amount  of  loss  is  simply  postponed,  and  all 
the  company  gains  is  the  interest  on  these  deferred 
losses  which  must  occur  at  some  future  time.  The  next 
year  the  losses  may  be  $100,000  greater  than  the  tables 
call  for,  and  it  is  unwise  and  unscientific  to  distribute 
what  must  eventually  be  paid.  If  the  number  of  losses 
is  just  equal  to  the  tabular  limit,  but  if  the  average 
amount  of  each  death  loss  is  greater  than  the  average 
amount  of  the  policies,  which  is  usually  the  case,  a  de- 
ficiency is  occasioned  which  must  be  made  up  in  the 
future. 

Interest. 

The  company  assumes  that  the  reserves  will  earn  a 
certain  rate  of  interest,  usually  four  or  four  and  one 
half  per  cent.  When  the  assets  are  invested  in  inter- 
est-bearing securities,  they  usually  realize  from  five  to 
eight,  or  even  ten  per  cent.,  but  several  weeks  or  per- 
haps months  must  elapse  after  a  premium  is  collected 
before  it  is  permanently  invested,  and  in  every  com- 
pany a  large  sum  must  be  kept  on  deposit  in  the  banks 
in  order  to  meet  expenses  and  pay  losses,  so  that  the 
actual  average  rate  of  interest  which  will  be  received  on 
the  reserve  and  surplus  cannot  be  predicated  with  any 
absolute  exactness,  certainly  not  till  the  company  has 
had  some  age  and  experience. 

The  rate  of  four  or  four  and  a  half  per  cent,  is  gene- 
rally assumed  by  mutual  companies  as  the  basis  of  all 
their  calculations,  and  is  also  made  the  legal  standard 
in  most  States  where  an  official  valuation  of  policies  is 
required.  Whatever  interest  on  the  reserves  is  realized 
over  the  standard  rate  is  used  to  offset  any  deficiency 
in  losses  or  expenses,  or  if  none  of  these  exist,  then  it 
is  considered  as  surplus. 

Margin  or  Loading. 

The  company  having  decided  what  shall  be  the  net 
premium,  adds  a  loading  or  margin  for  expenses,  ex- 
cessive losses,  etc.  Since  these  cannot  be  predicated 
with  any  certainty,  but  only  on  the  law  of  average  and 
past  experience,  it  is  highly  important  that  the  compa- 
ny should  proceed  with  great  care  in  making  contracts 
which  are  to  last  for  a  mimbftr  of  years.  In  a  mutual 


132  IN8TE UCTION  BOOK 

company,  each  one  of  the  policy-holders  is  bound  to 
pay  the  losses  as  they  occur  to  the  extent  of  the  premi- 
ums on  his  policy,  but  no  farther.  It  is  highly  import- 
ant then  that  the  premiums  should  be  large  enough  at 
the  outset,  as  it  is  impossible  to  increase  them  after- 
ward on  policies  already  in  force.  Safety  to  the  policy- 
holder  is  one  of  the  most  important  considerations  in 
life  insurance,  and  the  company  must  charge  enough  at 
the  acceptance  of  a  risk  to  make  it  a  safe  transaction 
amid  all  the  vicissitudes  of  future  years. 

This  is  not  peculiar  to  life  insurance.  Fire  insur- 
ance companies  add  a  margin  to  their  premium  rates  to 
provide  for  the  losses  occasioned  by  extraordinary  con- 
flagrations, and  marine  and  accident  insurance  compa- 
nies also  adopt  a  similar  rule.  In  all  insurance  compa- 
nies solvency  is  of  the  highest  importance,  and  this 
can  only  be  obtained  by  having  premiums  large  enough 
to  cover  losses  and  expenses. 

Whatever  excess  there  is  in  the  margin  above  ex- 
penses and  other  claims  upon  the  company  (including 
dividends  to  stockholders,  if  any)  is  surplus.  Since 
the  margin  is  paid  at  the  beginning  of  the  insurance 
year  with  the  premium,  and  the  dividends  are  de- 
clared at  the  beginning  of  subsequent  years,  the  actual 
rate  of  interest  upon  the  unexpended  part  of  the  pre- 
mium must  be  added  to  it  in  finding  the  surplus  from 
this  source. 

We  have  then  three  principal  sources  of  surplus  gains 
— from  deferred  mortality,  interest,  and  loading.  There 
may  also  be  other  sources,  such  as  profits  realized  on 
the  sale  of  securities,  sales  of  real  estate,  rents  of  build- 
ings, profits  from  lapsed  policies,  etc.  Whatever  gains 
there  are  from  these  miscellaneous  sources,  should  be 
added  to  the  former  items. 


Period  of  Distribution. 

Until  within  a  few  years  many  companies  divided 
their  surplus  once  in  three  or  five  years.  This  practice 
allows  the  surplus  to  accumulate,  and  in  case  of  any 
extraordinary  losses,  here  is  a  resource  to  which  the 
company  can  apply;  for  until  the  surplus  is  actually  dis- 
tributed, it  is  subject  to  the  claims  of  the  company. 

Most  of  the  English  companies  distribute  their  sur- 
plus once  in  three,  five  or  seven  years,  the  most  com- 
mon period  being  five  years.  The  Equitable  Life  As- 
surance Society,  established  in  1786,  did  not  distribute 
any  surplus  during  the  first  twenty  years,  and  since  that 
period  it  has  divided  it  at  decennial  intervals. 


FOE  LIFE  AGENTS.  133 

The  principal  argument  in  favor  of  division  at  long 
intervals  is  that  in  some  years  the  mortality  is  much 
greater  among  policy-holders  than  in  others,  and  it  is  to 
avoid  the  irregularities  which  must  necessarily  appear 
in  annual  distributions  that  these  longer  periods  are 
chosen. 

This  practice  is  eminently  safe  and  conservative;  too 
much  so  for  the  competition  and  rivalry  of  our  compan- 
ies at  the  present  day,  and  the  annual  distribution  of 
the  surplus,  commencing  on  the  payment  of  the  second 
or  third  premium,  is  generally  adopted. 

Methods  of  Distribution. 

The  principal  methods  of  distribution  used  in  this 
country  are  : 

Percentage  on  premiums  paid. 

Percentage  on  reserves. 

The  contribution  plan. 

Percentage  plan.  Until  within  a  few  years  the  per- 
centage plan  was  the  one  in  universal  use.  It  is  per- 
formed by  returning,  usually  four  years  after  the  pre- 
mium is  paid,  a  certain  proportion  or  ratio  of  that  pre- 
mium. It  is  the  plan  usually  adopted  by  the  English 
companies  at  the  present  day,  and  some  companies  in 
this  country  still  adhere  to  it,  either  wholly  or  in  part 
When  the  policies  were  nearly  all  on  the  whole  life 
plan,  with  few  or  no  endowments,  the  want  of  equity  in 
it  was  not  then  so  clearly  manifest.  But  when  different 
kinds  of  premiums  have  arbitrary  rates  of  loading,  or 
when  premiums  aie  computed  on  different  mortality 
tables  and  rates  of  interest,  the  inequality  of  dis- 
tribution becomes  clearly  manifest.  A  uniform  percent- 
age of  surplus  is  not  earned,  and  therefore  cannot  be 
returned  without  robbing  some  policy-holders  to  the 
benefit  of  others.  In  practice,  however,  the  percent 
age  plan  was  productive  of  considerable  satisfaction 
among  those  companies  where  the  half  note  system 
prevailed.  A  uniform  percentage  of  surplus  and  half 
credit  premiums  brought  the  insurance  down  to  very 
nearly  the  net  cost,  and  was  practically  carrying  out  the 
stock  plan.  It  had  this  advantage,  that  it  was  usually 
regular  from  year  to  year,  and  people  depended  upon  it 
with  little  fear  of  disappointment.  When  the  science 
of  life  insurance  came  to  be  more  studied,  it  was  seen 
that  there  were  some  radical  defects  in  it.  It  failed  to 
do  equal  justice  to  endowments,  limited  term  life,  and 
whole  life  policies  ;  to  some  it  gave  too  much  surplus 
and  to  others  too  little.  Besides,  the  increasing  ex- 


134  INSTRUCTION  BOOK 

penses  of  companies  made  it  impossible  to  pay  BO  large 
a  dividend  during  the  first  years  of  a  policy  without 
invading  the  reserve  fund.  For  these  and  other  reasons 
the  old  companies  have  generally  abandoned  it,  and  the 
new  companies  have  never  adopted  it 

Percentage  on  reserves.  This  plan  has  been  adopted 
by  a  few  companies,  but  has  not  come  into  general  use. 
It  is  claimed  that  if  the  premiums  are  all  computed  on 
the  same  table  of  mortality  and  interest,  and  have  the 
same  loading,  then  this  plan  gives  an  equitable  distribu- 
tion. It  is  much  more  easily  understood  than  the  con- 
tribution, and  more  equitable  than  the  percentage  plan 

The  Contribution  Plan. 

Our  remarks  upon  "Premiums,  Mortality,  Interest, 
Margin  or  Loading,"  etc.,  may  be  considered  as  prelim- 
inary to  an  examination  of  the  "  Contribution  Plan"  of 
dividing  surplus.  This  method  was  first  applied  to  the 
distribution  of  surplus  by  Mr.  Sheppard  Homans,  for- 
merly actuary  of  the  Mutual  Life  Insurance  Company 
of  New  York.  It  was  used  for  the  first  time  in  1863  in 
the  distribution  of  the  quinquennial  dividends  of  that 
company,  and  it  has  since  been  adopted  by  most  of  the 
American  companies. 

It  is  so  called  because  each  item  of  excess  in  inter- 
est, loading,  etc.,  is  made  to  contribute  its  own  propor- 
tion on  each  policy  to  the  sum  total  of  the  surplus.  It 
enables  the  company  to  keep  an  account  of  all  the 
sources  of  income  and  items  of  expenditure  on  each 
policy,  and  every  policy-holder  has  his  share  of  the 
surplus  credited  to  him  at  the  end  of  each  insurance 
year. 

Since  many  companies  make  the  "gain  from  vital- 
ity," or  the  excess  of  tabular  over  the  actual  mortality, 
a  source  of  surplus,  we  will  explain  how  this  is  done, 
although  we  have  stated  our  reasons  for  regarding  it  as 
unscientific  and  unsafe. 

Cost  of  insurance.  According  to  the  Combined  Ex- 
perience Table  of  Mortality  and  four  per  cent,  inter- 
est, a  man  aged  45,  insuring  on  the  whole  life  plan  for 
$1,000,  at  the  end  of  the  fifth  year  has  a  reserve  on  his 
policy  of  $93.34.  This  is  his  "  self-insurance,"  as  Hon. 
Elizur  Wright  calls  it,  or  the  amount  which  he  has  on 
deposit  with  his  company,  and  it  is  the  amount  for 
which  he  insures  himself —  the  balance  ;  or  $1,000  — 
93.34  =  906.66  is  the  amount  which  the  company  as- 
sumes as  a  risk;  that  is,  the  whole  amount  of  the  policy 
is  divided,  the  policy-holder  insuring  himself  to  the 


FOR  LIFE  AGENTS. 


135 


amount  of  his  reserve  and  the  company  insuring  the 
balance.  These  two  quantities  are  continually  chang- 
ing, and  are  seldom  the  same  two  days  in  succession, 
but  for  the  sake  of  convenience  and  uniformity  we  take 
the  value  of  the  policy  at  the  end  of  the  year.  At  the 
end  of  four  years,  what  is  the  probability  that  the  com- 
pany will  have  the  $906.66  to  pay  during  the  coming 
year,  or  what  is  the  cost  of  insurance  ?  The  probabil- 
ity by  the  Combined  Experience  Table  that  he  will  die 
during  the  fifth  year  is  found  by  dividing  the  tabular 
mimber  of  deaths  at  the  age  49  by  the  tabular  number 
of  living,  or  -^p/fa  ;  that  is,  out  of  70,580  persons  living 
at  the  age  49,  1,063  will  die  before  the  year  ends,  or 
the  probability  that  any  one  of  these  persons  will  die 
is  Vififift  =  -015061,  and  the  risk  that  the  company 
runs  of  losing  a  dollar  under  these  circumstances  is  one 
cent,  five  mills  and  a  fraction.  The  amount  of  risk 
which  the  company  assumes  of  losing  906. 66  during 
the  year,  is  906.66  X  .015061  =  $13.65,  which  is  the 
tabular  cost  of  insurance,  which  is  found  by  deducting 
the  reserve  at  the  end  of  the  year  from  the  amount  in- 
sured and  multiplying  the  difference  by  the  probability 
of  dying  that  year. 

The  following  table,  based  upon  the  Combined  Ex- 
perience Table  of  Mortality  and  four  per  cent,  interest, 
gives  an  illustration  of  the  cost  of  insurance  on  a  policy 
of  $1,000,  issued  on  the  whole  life  plan  at  the  age 
45.  If  the  actual  mortality  is  only  three  fourths  of  the 
tabular  rate,  the  last  column  shows  what  is  sometimes 
distributed  as  ' '  gains  from  vitality  :" 


Year  of 
Policy. 

Reserve. 

Amount 
at  Risk. 

Probability 
of  dying. 

Cost  of 
lusur'ce. 

Gains  frm 
vitality. 
25  per  ct. 

1 

$18.01 

$981.99 

MOM 
T445? 

$11.99 

$3.00 

2 

36.36 

963.64 

Tss-fB 

12.37 

3.09 

3 

55.04 

944.96 

yflir 

12.77 

3.19 

4 

74.03 

925.97 

iWr 

13.20 

3.30 

5 

93.34 

906.66 

^m 

13.65 

3.41 

6 

112.94 

887.06 

rfsWYV 

14.14 

3.53 

7 

132.80 

867.20 

rfm 

14.65 

3.66 

8 

152.91 

847.09 

#¥& 

15.20 

3.80 

In  the  following  illustration  we  have  a  policy  issued 
on  the  whole  life  plan  at  the  age  of  45  for  $1,000.  The 
explanation  of  the  Contribution  Plan  is  based  upon  the 
following  assumptions  : 

1.  The  net  premiums,  reserves  and  cost  of  insurance 
are  computed  on  the  Combined  Experience  Table  ol 
Mortality  and  four  per  cent,  interest. 


136  TNSTR UCTION  BOOK 

2.  The  average  expenses  of  the  company  are  15    per 
cent,  of  the  gross  premiums. 

3.  The  average  interest  realized  on  the  assets  is  six 
and  one  half  per  cent. 

FIRST  TEAS. 

First  Source— From  loading. 

Gross  premium,    ......  $87.97 

Net  premium, 28.85 


Loading $9.12 

Expenses,  37.97  X  -16  =  6.70 

Difference, $3.42 

Interest  6%  per  cent.,    .    4    .    .  .32 

Surplus  from  loading,    ....  $3.64 

Second  Source. — Interest  on  reserves. 

Keserve  at  the  end  of  first  year,     $18.01 

Difference  between  actual  and 
assumed  rate  of  interest  6% 
—  4  =  2%  multiplied  by  re- 
serve, 18.01  X  -02% .45 

Total  surplus  from  these  two 
sources  at  the  end  of  the  first 
year,  3.64  +  45  =  ....  $4.09 

SECOND  TEAS. 

First  Source. — Surplus  from  loading  same  as  before,    $3.64 
Second  Source. — Interest  on  reserves,  36.36  X  -02 %,         .91 


Total  surplus, $4.55 

THIBD  TEAB. 

First  Source. — Surplus  from  loading,  .  $3.64 
Second  Source, — Interest  on  reserves, 

65.04  X  -02%   = 1.38 

Total  surplus, $5.02 

FOUBTH  TEAS. 

First  Source— Surplus  from  loading .  $3.64 

Second  Source — Interest  on  reserve,    $74.03  X  .02%=  1.85 

Total  surplus, $5.49 

JTFTH  TEAS. 

First  Source— Surplus  from  loading.  $3.64 
Second  Source — Interest  on  reserves    $93.34  X  .02%=  2.33 

Total  surplus ,  $5.97 

SIXTH  TEAB. 

First  Source— Surplus  from  loading.  $3.64 

Second  Source— Interest  on  reserve,  $112.94  X  .02%=  2.t* 

Total  surplus $6.46 

SEVENTH  TEAB. 

First  Source— Surplus  from  loading.  $3.64 

Second  Source— Interest  on  reserves  $132.80 X  .02%=  3.32 

Total  «r«*i>hw $6.96 


FOR  LIFE  AGENTS. 


137 


EIGHTH   YEAlt. 

First  Source  —  Surplus  from  loading. 

Second  Source  —  Interest  on  reserves  $162.91  X 


Total  surplus 


$364 
=  3.82 

$7.46 


This  illusl  ration  is  simply  designed  to  show  the  me- 
thod of  finding  the  surplus,  and  the  assumptions  are 
entirely  arbitrary.  In  practice  many  other  items  may 
come  in  to  vary  these  results,  such  as  profits  on  invest- 
ments, gains  from  lapsed  policies,  a  low  rate  of  com- 
mission in  collecting  renewals,  and  should  the  mortali- 
ty in  any  given  year  be  excessive,  the  excess  should  be 
deducted  from  the  loading. 

Application  of  Surplus. 

SEDUCTION  OP  NET  ANNUAL  PREMIUM, 


Tear 

Gross 
Premium. 

Redac- 

Balance. 

First  year's  premium 

$37.97 

$37.97 

Second               " 

37.97 

$4.09 

33.88 

Third 

37.97 

4.55 

33.42 

Fourth               " 

37.97 

5.02 

32.95 

Fifth                   " 

37.97 

5.49 

32.48 

Sixth                   « 

37.97 

5.97 

32.00 

Seventh             " 

37.97 

6.46 

31.51 

Eighth               •' 

37.97 

6.96 

31.01 

Ninth                 » 

87.97 

7.46 

30.51 

Reversionary  Insurance,  or  Additions  to  the 
Policy. 

The  amount  of  reversionary  insurance  which  the  sur- 
plus will  purchase  is  found  by  dividing  it  by  the  net 
single  premium  of  $1  for  the  present  age  of  the  policy- 
holder.  For  the  sake  of  simplicity  we  take  the  net  sin- 
gle premium. 


First  year,  amount  insured 



$1000.00 

Second    '« 

" 

$1000.00  +  (4.09  - 

-  .43886)= 

1009.32 

Third      " 
Fourth    " 

" 

1009.32  +  (4.55  - 
1019.45  -f  (5.02  - 

-  .44935)= 
-  .46002)= 

1019.45 
1030.36 

Fifth 

" 

1030.36  +  (5.49  - 

-  .47088)= 

1042.02 

Sixth 

' 

" 

1042.02  -f  (5.97  - 

-  .48091)= 

1054.41 

Seventh 

' 

" 

1054.41  -f  (6.46  - 

-  .49311)= 

1067.61 

Eighth 

' 

«            11 

1067.51  +  (6.96  - 

-  .50446)= 

1081.31 

Ninth 

, 

1081.31  +  (7.46  - 

-  .51595)= 

1095.77 

There  will  also  be  a  small  amount  of  additional  insurance  de- 
rived from  the  surplus  of  the  paid-up  insurance  ;  but  it  was  not 
deemed  best  to  puzzle  the  reader  with  it. 


Purchase  of  Term  Insurance. — The  surplus  can  also 
be  applied  to  the  purchase  of  term  insurance  for  one  or 
more  years.  In  the  example  which  follows,  we  use  the 
reserve  to  purchase  single  premiums  of  term  insurance 
for  seven  years.  At  age  46,  $1  of  term  insurance  for 


138 


INSTRUCTION  BOOK 


seven  years  will  cost  .086671,  and  the  first  dividend  ol 
$4.09  will  purchase  $47.19  insurance.  At  the  age  47, 
$1  term  insurance  for  seven  years  will  cost  .091507, 
and  the  dividend,  $4. 55,  will  insure  $49.72  for  that  time. 
The  following  plan  will  illustrate  this  method  : 


Age. 

Sing.  prem. 
to  insure 
$1  for  7  yrs. 

Surplus. 

Term  insur- 
ance, 7  yrs. 

Amount  of 
policy. 

45 

$1000.00 

46 

.086671 

$4.09 

$47.19 

1047.19 

47 

.091507 

4.55 

49.72 

1096.91 

48 

.096736 

5.02 

51.89 

1148.79 

49 

.102398 

5.49 

53.60 

1202.39 

50 

.108531 

5.97 

55.01 

1257.40 

51 

.115131 

6.46 

56.11 

1313.51 

52 

.122250 

6.96 

56.93 

1370.44 

53 

.129903 

7.46 

57.39 

1380.64 

Up  to  the  age  52,  the  increased  insurance  of  each 
year  is  added  to  the  policy.  At  the  age  53  the  insu- 
rance, $47.19,  added  at  the  age  46,  having  been  in  force 
seven  years,  is  deducted  and  $57.39  added. 

This  plan  enables  the  policy-holder  to  get  a  much 
larger  amount  of  insurance  on  his  life  during  the  ear- 
lier years  of  his  policy  than  by  reversionary  insurance. 
By  this  method  his  additional  insurance  at  age  53  is 
$380.64,  while  if  the  dividends  had  been  used  to  pur- 
chase reversionary  insurance  it  would  have  amounted 
to  only  $95.77. 

The  following  table  will  show  what  will  be  the  result 
if  the  surplus  is  applied  to  the  purchase  of  term  insu- 
rance for  one  year : 


Age. 

Sing.  prem. 
to  insure  $1 
for  1  year. 

Surplus. 

Term  insur- 
ance, 1  year. 

Amount  of 
policy. 

45 

46 

.012345 

$4.09 

$331.31 

$1331.31 

47 

.012996 

4.55 

350.11 

1350:il 

48 

.013711 

5.02 

366.13 

1366.13 

49 

.014482 

5.49 

379.09 

1379.09 

50 

.015326 

5.97 

389.54 

1389.54 

51 

.016248 

6.46 

397.59 

1397.59 

52 

.017257 

6.96 

403.31 

1403.31 

53 

.018359 

7.46 

406.34 

1406.34 

Advantages  and  Defects. 

In  every  different  method  of  applying  the  surplus 
there  are  some  advantages  and  some  disadvantages 


FOR  LIFE  AGENTS.  139 

which  the  agent  will  readily  see  by  observing  these  ta- 
bles. In  the  first  method,  the  premiums  are  gradually 
reduced  each  succeeding  year,  and  the  insured  has  the 
less  to  pay  the  longer  he  lives,  while  the  sum  insured 
remains  the  same.  In  the  second  method,  the  amount 
insured  increases  gradually  during  life,  and  if  the  con- 
tingency should  occur  that  the  insured  should  be  una- 
ble to  pay  his  regular  premiums,  this  amount  of  sur- 
plus thus  accumulated  can  be  used  in  some  companies 
to  keep  his  policy  in  force,  or  when  the  accumulated 
cash  value  of  the  surplus  and  the  reserve  is  equal  to 
the  single  premium  at  the  increased  age  of  the  poli- 
cy-holder, he  is  entitled  to  a  paid-up  policy  for  the 
original  amount.  In  the  third  and  fourth  methods,  the 
temporary  increase  of  the  policy,  the  policy-holder 
expends  the  whole  amount  of  his  surplus  each  year  in 
purchasing  new  insurance,  and  consequently  there  is 
no  reduction  of  premiums.  He  gets  a  larger  amount 
of  insurance  at  first,  but  it  is  not  uniform  during  life. 
If  he  suspects  that  he  is  destined  to  live  but  a  few 
years,  this  is  the  most  profitable  plan  for  him  to 
choose. 

Tontine  Insurance. 

A  tontine  is  the  oldest  form  of  a  life  contingency. 
The  original  plan  of  a  tontine  was  for  a  number  of  per- 
sons to  subscribe  a  sum  of  money  to  a  common  fund, 
and  the  interest  was  divided  annually  among  the  survi- 
vors, the  last  survivor  receiving  the  whole  of  the  fund. 
The  fundamental  idea  which  lies  at  the  base  of  all  ton- 
tines is  that  the  survivors  get  all  the  profits  which  have 
accrued  up  to  the  period  of  division.  In  the  applica- 
tion of  this  principle  to  the  distribution  of  surplus,  the 
same  law  is  observed:  the  survivors  and  those  who  keep 
their  policies  in  force  obtain  the  whole  of  the  reserves 
and  surplus  of  those  who  allow  their  policies  to  lapse, 
and  the  surplus  of  those  who  die  before  the  period  of 
its  distribution. 

The  principal  features  in  the  plan,  as  adopted  by 
some  American  companies,  are  as  follows  : 

"  Tontine  policies  issued  in  each  year  are  to  be  kept 
in  distinct  and  separate  classes,  in  which  the  surplus 
remains  with  the  company  for  ten,  fifteen  or  twenty 
years,  to  be  accunmlated  for  the  sole  benefit  of  the 
surviving  members,  among  whom  it  is  to  be  divided  ex- 
clusively at  the  end  of  the  stipulated  time. 

"The  insured  chooses  at  the  time  of  application 
whether  he  will  enter  the  ten  year,  the  fifteen  year,  or 


140  INSTR UCTION  BOOK 

the  twenty  year  class,  but  can  make  no  change  from 
one  class  to  another  after  the  issue  of  his  policy. 

"In  case  of  death  within  the  tontine  period,  the 
amount  of  insurance  only  will  be  paid,  without  allow- 
ance for  accrued  surplus." 

Persons  discontinuing  their  payments  during  the 
tontine  period  will  receive  no  surrender  value  or  paid- 
up  policy,  but  forfeit  the  same,  together  with  the  accu- 
mulated surplus. 

"  The  usual  thirty  days'  grace  is  allowed  for  the  pay- 
ment of  premiums,  with,  however,  a  fine  at  the  rate  of 
10  per  cent,  per  annum  when  this  grace  is  accepted. 

"  No  policies  can  be  restored  after  forfeiture  on  any 
account  whatever. 

"  At  the  end  of  the  tontine  period  the  fund  accumu- 
lated to  the  credit  of  the  class  is  divided  among  the  re- 
maining members.  Each  member  has  the  option  of 
withdrawing  his  share  in  cash,  applying  it  to  purchase 
a  paid-up  policy,  or,  if  he  is  desirous  of  continuing  his 
insurance,  the  surplus  over  what  is  necessary  as  a  re- 
serve, and  to  pay  the  premium  then  due,  may  be  em- 
ployed to  secure  an  annuity  toward  paying  subsequent 
premiums," 

The  tontine  policy  becomes  a  triple  "bet "on  the 
part  of  the  insured.  As  in  the  ordinary  form  of  life 
policy,  he  bets  that  he  will  die  during  the  year,  and 
puts  up  his  premium  on  the  result.  In  the  second 
place,  he  bets  that  he  will  live  till  the  period  of  distri- 
bution of  surplus,  and  stakes  his  share  of  it  on  this  re- 
sult. In  the  third  place  he  bets  that  he  will  be  pros- 
perous enough  to  pay  his  premiums  promptly,  and 
pledges  both  his  surplus  and  his  reserve  on  the  issue. 
Just  so  far  as  the  first  bet  is  the  proper  and  legitmate 
one  in  life  insurance,  so  far  the  second  is  contrary  to  it, 
and  the  third  is  introducing  an  entirely  foreign  element 
into  the  plan.  Whether  all  three  of  these  incongruous 
elements  are  for  the  ultimate  advantage  of  the  policy- 
holder,  he  must  decide  for  himself. 

In  tontine  insurance  the  advantage  to  be  realized  by 
the  policy-holder  is  the  largely  increased  dividends  to 
be  derived  from  the  lapses  of  those  who,  unable  to  ful- 
fill their  obligations  to  the  company,  forfeit  their  sur- 
plus and  reserves  to  the  common  fund,  which  at  the 
end  of  the  stated  period  is  distributed  among  the  more 
fortunate  policy-holders. 

It  is  not  strange  that  this  plan  of  insurance  should 
have  attractions  for  many,  especially  those  who  see 
only  the  prospective  gains  which  each  policy-holder 
feels  sure  he  is  destined  to  win.  Before  a  man  takes  a 


FOR  LIFE  AGENTS.  141 

policy  of  this  class,  he  should  seriously  consider  whe- 
ther financial  prosperity  has  not  as  many  contingen- 
cies as  human  life,  and  which  carries  the  greater  risk, 
he  or  the  company.  He  who  proves  himself  strong 
enough  in  the  purse  to  win  at  last,  will  obtain  a  hand- 
some return  for  his  investment,  especially  if  commercial 
panics  or  a  general  stagnation  in  business  should  com- 
pel many  others  to  abandon  their  policies. 

While  the  advantages  of  this  plan  to  those  who  suc- 
ceed in  keeping  their  policies  in  force  are  undeniable, 
since  they  are  absolutely  certain  to  realize  a  larger  pro- 
fit than  by  other  plans,  there  are  some  defects  in  it 
which  the  policy-holder  ought  to  know. 

The  fundamental  idea  of  an  ordinary  life  insurance 
contract  is  that  the  company  assumes  the  risk  of  pay- 
ing the  amount  insured  for  an  annual  compensation, 
while  all  the  risk  which  fells  upon  the  policy-holder  is 
only  the  difference  between  the  reserve  and  the  surren- 
der value  of  the  policy  in  case  it  should  lapse.  But  in 
this  plan,  the  policy-holder  gets  no  annual  compensa- 
tion for  the  risk  he  assumes  that  all  his  surplus  and  re- 
serves may  be  forfeited  by  non-payment  of  premium  ; 
it  is  only  in  case  that  he  ' '  endures  to  the  end  "  that  he 
is  rewarded.  There  is  an  inequality  in  the  actual  amount 
of  risk  covered  by  these  two  parties.  In  the  nineteenth 
year  of  the  policy,  according  to  the  table,  page  142,  the 
reserve  is  $209.84,  and  the  surplus  is  $655.79,  making 
$865.33,  which  the  policy-holder  is  liable  to  lose  unless 
he  pays  $19.89,  while  all  the  risk  the  company  assumes 
this  year  is  $1,000  —  $865.63  =  $134.37.  Can  the 
average  policy-holder  at  any  time  afford  to  carry  so 
much  more  insurance  for  himself  than  the  company 
does  for  him  ? 

On  the  part  of  the  companies,  however,  this  plan  has 
the  tendency  to  check  the  great,  and  in  many  instances 
unnecessary  lapsing  of  policies,  and  so  far  as  it  holds 
people  to  the  obligations  they  have  assumed  and  the 
contracts  they  have  made  with  the  company,  so  far  it 
will  be  a  benefit  to  life  insurance,  and  as  the  policies 
are  prevented  from  lapsing,  the  average  mortality  of  the 
company  is  lessened,  for  the  principle  of  self-selection 
which  the  policy-holders  adopt,  uniformly  operates 
against  the  company. 

In  the  following  table  we  have  given  an  illustration  of 
the  practical  working  of  this  plan,  based  upon  certain 
assumptions  which  may  or  may  not  be  realized  after  ten 
or  twenty  years  of  practical  operation.  As  this  plan 
has  only  been  recently  introduced  into  this  country,  it 


142 


JNS TR UCTION  BOOK 


00      -I 


.g 
s  * 


8  - 


H 


i. 

s 

•i 

•e  in 


11! 


2S 


Mnmber  of 
pollciei  In 
force. 


^  cs  co 


4  C4  tQ  9  Q  IO  O  CO  O 


>  O  1C  ^  io  O  00-53 

illiifFl 

1  r-t  ,-|  ,-(  C*  (*q  c^  c^ 


cscooaiooocoJHcoaoioo 


cot-c^tOT-i^c^ 


FOR  LIFE  AGENTS.  143 

is  proper  to  add  that  all  calculations  and  assumptions 
about  the  prospective  profits  are  baaed  upon  the  ordina- 
ry experience  of  policies,  and  not  from  the  practical  op- 
eration of  the  tontine  plan  itself. 


EXPLANATION  Or  THE  TABLE. 

A,  the  age  of  the  policy-holder  during  the  successive 
years  of  the  policy. 

B,  the  number  of  policies  in  force  each  year. 

C,  the  number  of  lapses  which  take  place  during 
each  year. 

D,  the  annual  death  claims. 

E,  the  gross  amount  of  premiums  received  each  year 
from  policies  in  force. 

F,  the  annual  expenses,  50  per  cent,  first  year,  20 
per  cent,  second  year,  and  10  per  cent,  thereafter. 

G ,  the  annual  premiums  less  expenses. 

H ,  the  fund  accumulated  at  the  beginning  of  each 
year. 

I,  interest  on  the  fund  at  7  per  cent,  per  annum. 

J ,  the  amount  of  the  fund  with  interest. 

K,  the  fund  at  the  end  of  the  year  less  the  death 
losses. 

L,  reserve  on  the  policies  in  force,  Combined  Expe- 
rience four  per  cent. 

M ,  surplus  at  the  end  of  each  policy  year. 

N ,  surplus  which  is  credited  to  each  policy-holder. 

At  the  age  25,  1,000  persons  insure  ;  at  the  end  of  the 
year,  75  allow  their  policies  to  lapse,  and  there  are 
eight  death  losses  of  $1,000  each.  The  amount  of  pre- 
miums received  during  the  first  year  is  $19,890,  and 
allowing  50  per  cent,  for  expenses,  the  net  premiums 
are  $9.945.  This  amount  accumulated  at  7  per  cent, 
interest,  which  is  $696.15,  is  $10,641.15.  Deducting 
$8,000  death  losses,  we  have  the  remainder,  $2,671.15, 
which  is  less  than  the  reserve  and  there  is  a  defi- 
ciency. 

The  next  year,  at  the  age  26,  917  premiums  are  paid, 
amounting  to  $18.239.13,  69  policies  lapse,  and  there 
are  $8,000  death  losses.  Allowing  20  per  cent,  for  ex- 
penses, which  amounts  to  $3,647.83,  we  have  left 
$14,591.30,  which  added  to  the  $2,641.15  in  column  K, 
makes  $17,232.45.  The  interest  in  this  at  7  per  cent, 
is  $1,206.27,  and  the  total  fund  is  $18,438.72.  De- 
ducting $8,000  losses,  the  remainder  is  $10,438.72, 
which  is  still  less  than  the  reserve. 

The  third  year,  allowing  ten  per  cent,  for  expenses 
in  this  and  each  subsequent  year,  we  have  in  column 


144  INSTRUCTION  BOOK 

Q  $15,036.84  net  premiums,  which  added  to  the  fund 
of  last  year  in  column  K  ($10,488.72)  makes  the  fund 
at  the  beginning  of  the  third  year  to  be  $25,475.56, 
adding  $1,783.29  interest,  it  amounts  to  $27,258.85, 
and  deducting  $7,000  losses,  there  is  remaining  $20,- 
258.85,  which  leaves  a  surplus,  after  deducting  the  re- 
serve of  $19,790.40,  of  $468.45.  If  the  reserve  should 
be  distributed  among  the  774  policy-holders  who  keep 
their  policies  in  force,  the  share  to  each  one  would 
be  .61. 

At  the  end  of  the  tenth  year,  the  surplus  amounts  to 
$55,657.30,  which  divided  among  463  policy-holders, 
the  number  which  keep  their  policies  in  force,  we  have 
$120.43  as  the  share  of  each.  This  amount,  converted 
into  paid-up  insurance,  would  amount  to  $353.59. 

At  the  end  of  the  twentieth  year  we  have  $193,405.70 
surplus,  which  divided  among  251  policy-holders  who 
remain,  gives  to  each  $770.54.  This  converted  into 
paid-up  insurance  would  add  $1,798.10  to  the  policy, 
making  the  sum  insured  $2,798.10. 

This  surplus  may  be  converted  into  an  annuity 
(Combined  Experience  four  per  cent.)  in  addition  to  a 
paid-up  policy,  in  the  following  manner  : 

Eeserve  end  of  twentieth  year,       ....     $209.84 
Surplus  dividends, 770.54 

Total 980.38 

Single  premium,  age  45, 428.57 

Surplus  on  paid-up  policy •    $551.81 

Present  value  of  annuity  of  $1 14.8571 

Annuity  which  the  surplus  will  purchase,    .        37.14 

which  is  nearly  twice  the  annual  premiums  hitherto 
paid. 

If  a  man  wishes  to  speculate  on  this  kind  of  insur- 
ance he  has  only  to  take  out  a  policy  on  this  plan  and 
"  hedge"  his  payments  by  purchasing  a  term  annuity 
for  the  prescribed  number  of  years.  The  present  value 
of  a  term  annuity  $19.89  for  twenty  years  (Combined 
Experience  4  per  cent)  is  $262.24,  but  his  reserve  is 
$209.84,  andhis  surplus  $770.54,  making  $980.38,  which 
equals  $262.24,  invested  for  twenty  years  at  compound 
interest  at  a  rate  a  little  less  than  seven  per  cent.,  so 
that  he  has  kept  his  life  insured  and  made  nearly  seven 
per  cent,  on  his  investment.  If  he  purchases  an  annu- 
ity for  $226.84,  (American Experience  seven  per  cent.,) 
then  he  would  make  nearly  eight  per  cent  and  keep  his 
life  insured,  without  incurring  any  risk  that  his  policy 
would  lapse. 


FOR  LIFE  AGENTS.  Ho 


Savings  Bank  Life  Insurance. 

This  plan  of  insurance  is  presented  and  advocated  by 
Hon.  Elizur  Wright,  the  prominent  feattire  of  which  is 
the  guaranteeing  of  a  fixed  surrender  value  at  the  end 
of  each  year  of  a  policy.  To  find  the  surrender  value 
of  a  policy  on  this  plan,  the  present  value  of  the  future 
cost  of  insurance  on  the  policy  is  computed,  and  eight 
per  cent .  of  this  is  adopted  as  the  surrender  charge, 
which,  subtracted  from  the  reserve,  leaves  the  surren- 
der value. 

In  all  its  prominent  features  it  is  precisely  the  reverse 
of  tontine  insurance.  It  does  not  hold  out  the  induce- 
ment of  large  dividends,  for  the  premiums  are  loaded  a 
very  little  above  net  rates,  and  the  surrender  value  of 
the  policy,  which  can  always  be  known  by  referring  to 
it,  makes  it  a  safe  collateral  for  any  purpose.  After 
paying  the  necessary  expenses  and  losses,  whatever  sur- 
plus remains  is  distributed  annually  on  the  contribution 
plan. 

In  this  plan  the  attraction  is  the  surrender  value, 
and  as  all  members  of  the  company  who  adopt  this  form 
of  insurance  have  equal  rights,  the  usual  objections  to 
paying  large  surrender  values  do  not  apply  here.  No 
risk  is  incurred  by  the  policy-holder  lest  his  dividends 
and  reserve  may  be  forfeited  by  the  non-payment  of 
premiums.  As  a  savings  bank,  the  company  becomes  a 
safe  depository  of  an  annual  premium ,  the  reserve  of 
which  is  accunralated  at  a  stated  rate  of  interest  during 
the  period  of  insurance,  and  can  be  withdrawn  at  any 
time  by  paying  a  small  surrender  charge  ;  as  an  insur- 
ance company,  it  insures  his  Jife  to  the  amount  of  the 
policy,  payable  at  a  certain  age  if  living,  or  at  death  if 
this  event  should  occur  before  the  period  of  insurance 
expires. 

The  method  of  computing  the  surplus  and  surrender 
values  is  illustrated  in  the  table,  page  147,  and  ex- 
plained by  Mr.  Wright. 

By  this  plan  the  insurance  done  by  the  company  and 
the  self-insurance  by  the  policy-holder  are  kept  sepa- 
rate. "The  self-insurance  department  is  a  contract 
between  the  company  and  the  individual,  in  regard  to 
which,  except  as  to  the  interest  on  the  deposits  beyond 
four  per  cent.,  the  other  members  of  the  company  have 
no  concern  whatever,  any  more  than  one  depositor  in 
a  savings  bank  has  with  another.  The  deposits  with 
four  per  cent  interest  are  the  property  of  the  deposi- 
tor. They  have  no  effect  on  the  insurance  whatever; 
except  to  diminish  the  amount.  There  is  no  forfeiture 


146  INSTRUCTION  BOOK 

here  for  the  violation  of  any  condition.  Here  the  par- 
ty contracts  to  pay  annually  the  two  series  of  sums  con- 
tained in  the  first  and  second  columns.  The  "  constant 
margin  ''  of  the  first  column  for  insurance  expenses  and 
extraordinary  or  unexpected  death  claims.  The  "  normal 
cost  of  insurance  "  in  the  second  column  is  to  pay  the 
ordinary  cost  of  carrying  for  one  year  the  risk  placed 
against  it  in  the  third  column.  The  "  insurance  value  " 
in  the  fourth  column  is  the  present  value  of  the  current 
and  all  future  "normal  costs  of  insurance"  in  the  sec- 
ond column.  The  surrender  charge  in  the  fifth  column 
is  what  the  party  forfeits  by  violating  in  any  way  or 
terminating  at  his  option  this  insurance  contract.  It  is 
the  indemnity  which  the  company  is  to  receive  for  its 
loss  of  insurance  value  or  strength  by  the  non-fulfill- 
ment of  its  contra'ct.  Of  course  the  savings  bank  "re- 
serve "  is  the  only  security  the  company  has  for  the 
payment  of  this  indemnity,  and  it  is  always  sufficient 
for  that  purpose,  except  at  the  end  of  the  first  and 
sometimes  the  second  year  of  policies  of  very  long 
term.  The  ' '  surrender  value  "  is  the  difference  between 
the  reserve  and  the  charge  for  canceling  the  insurance 
part  of  the  contract. 


FOR  LIFE  AGENTS. 


147 


en 

o 

—     _    —    u—    — 

co  oo  vj  01  en 

—  _  —  _-.— 
tf»  eo  to  i-1  o 

co  eo  co  eo  co 
CD  oo  vi  os  en 

Age  of 
person. 

: 

eo  eo  eo  co  co 

co  cc  eo  eo  eo 

n 

co  co  co  co  co 

p 

INSURANCE. 

OS   Oi   Oi   Oi   Oi 

OS    Oi    Oi    OS    Oi 

CO  CO  CO  CD  CO 
Oi  OS  OS  OS  OS 

— 

\->  to  eo  rf*. 

rf*.  en  en  os  os 

V]  V|  V|  OC  GO 

Normal 
costs  of 
insurance. 

o  to  co  to  o 

O  OS  W  rf*.l-» 

os  to  oo  eo  oo 
oo  oc  to  rf*.  o 

to  01  co  to  en 

CO  H*  tf»  *-  O 

(-»  tO  CO 

CD  VI  Oi  tf*- 

to  co  toi-i 

rf*-  *»•  en  cs  os 

h-1  OO  OI  IO  OO 
Oi  VI  C5  O  tO 

VI  V|  00  CO  CO 
^  CO  Cl  O  Ol 

to  oo  to  co  to 

Company's 

risks. 

O  H-"  en  en  co 
o  oo  oi  o  en 

CO  OO  OCOCO 

o  tf*.  eo  vj  co 
cs  vi  en  oo  -a 

NJ  co  os  o 

t-^M  to  to  eo 

t^.  CD  CO  CO  (f>> 

f| 
rfx  i^.  Cn  Cr?  Oi 
o  en  i-«  vi  eo 

Insurance 
values. 

S  to  en  en  to 
os  eo  CD  vi 

rf^  O  CO  O  rf^ 
tf«-  to  O  vi  vi 

O  vi  £>.  to  O 

rf>-  eo  oo  oi  vj 

co  co  *.  *• 

Surrender 
charges. 

O  i-»  to  en  oo 
o  o  oo  eo  to 

i_i  en  co  co  vj 

OS  tO  H-i  CO  Oi 

to  oi  f->  en 
o  os  to  oo 

en  en  en  en  #>. 

CO  tO  h->  O  CO 

,i-  i^  -U  —   ^-. 
CO  OO  VJ  V|  OS 

_  _  ^.  .^  _ 
Oi  os  en  en  en 

Deposits. 

SELF-INSURANCE. 

tO  Oi  CO  OC  I-4 

O  tf»-CO  CO  O 

t^-  *>  o  oc  to 

tf^  I—  >  V|  ^  tO 

CO  H-  OO  OO  tO 

>—  i 
I 

§00  vi  oi  en 
to  cc  en  oo 

V|  O  VJ  OO  CO 

en  *••  co  co  to 
t-1  **»•  vj  H>  en 
to  eo  co  vi  ~j 

to  i->      «»• 

I-1  V|  Oi  V|  ' 

Reserve. 

OO  ^  Cn  OS  Oi 

to  rf*-  o  en  H-  ' 

H-  1  CD  O  O  O 
CO  OS  1—  '  OI  tf»- 

en  oi  to  o  • 

co  en  to  co  • 

8 
p 

o 
o 

co  oo  vi  os  en 
o  to  eo  en  oo 
vi  o  vi  oo  to 

en  *-  eo  eo  to 
o  LO  vi  4^  en 

—  —       £»• 

o  tf*.  o  t^  • 
oo  co  to  to- 

Surrender 
values. 

oo  eo  to  i-1  -q 
to  rf*  to  toco 

SfcSSS 

co  CO  l-»  If" 

coco  o  en- 

en 

if",  cc  to  P->  o 

co  oo  <i  os  en 

^W  —  : 

Age  of 
policy. 

148  INSTRUCTION  BOOK. 


CHAPTEK  XV. 
THE  LAW  OF  LIFE  INSURANCE 

IN  this  chapter  we  propose  to  give  a  summary  of  the 
leading  principles  of  law  which  apply  to  life  insurance 
companies  and  their  agents.  It  is  highly  important 
that  the  latter  should  have  a  general  idea  of  their  legal 
relations  to  the  company  and  their  responsibilities  to 
it,  as  well  as  of  the  obligations  and  privileges  of  the 
policy-holders.  We  shall  first  give  an  outline  of  gene- 
ral principles  and  then  practical  illustrations  and  di- 
gests of  decisions. 

It  is  hoped  that  a  perusal  of  this  chapter  will  enable 
fcgents  to  avoid  many  acts  which,  through  ignorance  or 
begligence,  lead  to  vexatious  litigation  or  the  payment 
Of  claims  which  ought  never  to  have  been  incurred. 
Life  insurance  companies  naturally  avoid  litigation, 
and  it  often  happens  that  they  pay  unjust  claims  rather 
than  go  into  court.  Juries  are  not  apt  to  find  verdicts 
in  their  favor  if  they  can  help  it,  and  the  tendency  of 
recent  decisions,  as  will  be  seen  hereafter,  is  to  hold 
the  companies  strictly  responsible  for  the  acts  of  their 
agents.  This  subject  has  an  additional  importance 
when  we  consider  that  the  companies  depend  upon 
agents  scattered  throughout  the  different  States,  for 
nearly  all  their  business  ;  the  officers  have  little  or  no 
acquaintance  with  them,  and  yet  the  companies  are 
held  legally  responsible  for  all  their  acts  done  in  the 
prosecution  of  their  business.  How  important  it  is, 
then,  that  in  making  contracts  involving  the  payment 
of  thousands  and  millions  of  dollars,  that  the  agent 
should  have  some  knowledge  of  the  legal  bearings  of 
his  actions. 

Trie  Company  as  a  Corporation. 

A  life  insurance  company  is  a  corporation,  and  as 
such  it  is  "an  artificial  being,  invisible,  intangible,  and 
existing  only  in  contemplation  of  law.  Being  the  mere 
creature  of  law,  it  possesses  only  those  properties 
which  tha  charter  of  its  creation  confers  upon  it,  either 
expressly  or  as  incidental  to  its  very  existence."  It  has 
also  certain  general  powers  which  are  incident  to  it ;  it 


FOR  LIFE  AGENTS.  149 

has  a  name  by  which  it  is  known  and  called,  and  by 
which  it  is  to  transact  business  ;  it  has  perpetual  suc- 
cession, that  is,  the  members  have  power  to  fill  vacan- 
cies by  election  ;  if  it  has  a  stock  capital,  its  shares  are 
transferable  to  assignees  and  are  considered  as  personal 
property.  In  its  corporate  name  it  can  sue  and  be 
sued,  buy  and  sell,  and  do  all  acts  such  as  natural  per- 
sons may,  within  the  limits  of  its  charter.  It  has  a 
common  seal  as  evidence  of  its  corporate  acts  ;  it  has 
the  power  of  making  by-laws  or  private  statutes  for  its 
own  government,  and  for  the  regulation  of  its  business, 
but  these  by-laws  must  be  in  accordance  with  its  char- 
ter. It  has  also  the  power  of  appointing  certain  officers 
and  agents  to  manage  its  affairs  and  by  whom  alone  its 
business  can  be  transacted.  By  common  law,  corpora- 
tions must  appear  by  attorney  to  defend  or  prosecute 
suits  at  law,  and  many  States  require  foreign  life  com- 
panies to  appoint  an  attorney  to  accept  service,  and 
against  whom  a  suit  may  be  brought  in  the  name  of  the 
company.  A  corporation  may  be  dissolved  by  the 
death  of  all  its  members,  by  the  surrender  of  the  fran- 
chise into  the  hands  of  the  legislature,  or  by  a  forfeit- 
ure of  its  charter  by  negligence  or  abuse  of  its  powers 
and  privileges. 

The  Agent — Powers  and  Duties. 

An  agent  is  a  person  appointed  by  another  to  tran- 
sact business  for  him,  and  the  person  who  employs  him 
is  called  the  principal.  Both  principal  and  agent  may 
be  firms  or  corporations  as  well  as  persons. 

A  general  agent  is  one  appointed  to  transact  all  the 
business  of  the  principal  of  a  particular  kind,  and  will 
bind  the  principal  as  long  as  he  keeps  within  his  gene- 
ral authority,  although  he  may  act  contrary  to  his  pri- 
vate instructions. 

A  special  or  particular  agent  is  one  constituted  for  a 
special  purpose,  under  a  limited  and  circumscribed 
power,  and  cannot  bind  his  principal  by  any  act  not 
within  his  authority. 

An  agent  cannot  delegate  to  a  third  person  power  to 
(act  for  him  unless  he  has  special  authority  from  the 
principal. 

The  act  authorizing  the  appointment  of  an  agent  may 
be  either  oral  or  in  writing  ;  an  oral  or  unwritten  au- 
thority will  authorize  a  written  exercise  of  it,  and  a 
written  authority  will  authorize  the  execution  of  an  in- 
strument not  under  seal,  but  to  execute  a  sealed  instru- 
ment, the  party  acting  must  have  sealed  power  or  au- 
thority. 


150  INSTRUCTION  BOOK 

If  a  company  approves  of  the  acts  of  one  in  the  capa- 
city of  agent,  or  retains  the  advantages  of  them,  it  will 
be  bound  by  them  although  it  gave  him  no  special  au- 
thority to  act  for  it. 

Every  act  of  an  agent  within  the  apparent  scope  of 
his  authority  will  be  binding  upon  the  principal,  for,  as 
third  persons  cannot  be  supposed  to  know  the  agree- 
ment between  the  parties,  and  can  judge  only  from  ap- 
pearance, the  agent  shall  be  presumed  to  transact  the 
business  in  which  he  is  ostensibly  engaged.  No  secret 
instructions  or  private  agreement  between  them  can  af- 
fect the  rights  of  others,  and  though  the  authority 
should  be  revoked,  the  principal  would  be  liable  to  an- 
other contracting  with  the  agent,  without  notice  of 
the  revocation,  at  least  till  proper  notice  had  been 
given. 

The  principal  is  responsible  in  civil  actions  for  the 
acts  of  his  agent,  and  if  the  agent  is  guilty  of  any 
fraud,  wrong  or  neglect,  in  the  course  of  his  business, 
an  action  will  lie  against  the  principal  in  favor  of  the 
party  injured. 

These  general  principles  apply  to  life  insurance  com- 
panies, and  recent  decisions  are  very  strong  in  making 
the  companies  responsible  for  the  acts  and  representa- 
tions of  its  agents  and  solicitors.  The  following  extract 
from  a  decision  recently  rendered  by  Chief  Justice  Day 
of  Iowa  is  clear  and  decisive.  In  this  case  the  agent 
insured  a  man  whom  he  knew  was  addicted  to  the  use 
of  intoxicating  liquors,  and  it  was  held  that  notice  of 
the  fact  to  the  agent  was  notice  to  the  company,  al- 
though it  was  stated  in  the  application  that  he  was  a 
temperate  and  sober  man.  * 

*  Notice  to  ail  agent  relating  to  business  which  he  is  authorized 
to  transact,  and  while  actually  engaged  in  transacting  it,  will,  in 
general,  inure  as  notice  to  the  principal. 

To  this  view  the  judicial  mind  seems  rapidly  tending,  and  it  is 
certainly  more  in  accord  with  the  enlightened  and  progressive  spi- 
rit of  the  age.  These  companies  select  their  own  agents,  require 
them  to  enter  into  bonds  for  the  faithful  discharge  of  their  du- 
ties, and  send  them  forth  provided  with  blanks  and  clothed  with 
all  the  insignia  of  authority.  If  their  ignorance  or  their  cupidity 
leads  them  to  recommend  improper  risks,  it  is  more  in  consonance 
with  reason  that  the  loss  should  be  borne  by  the  company  than 
that  the  assured  should  be  made  the  victim  of  the  incompetency 
or  avarice  of  the  agent.  More  especially  is  this  true  in  view  of 
the  fact  that  the  company  has  the  means  of  indemnity  through 
the  bond  of  the  agent. 

Just  principles  of  public  policy  require  that  these  companies  should 
be  held  to  a  strict  degree  of  responsibility  for  the  acts  of  their  agents. 
They  will  thus  be  led  to  the  exercise  of  greater  circumspection  in 
the  selection  of  them,  and  the  masses  will,  in  part  at  least,  be  re- 


VCR  LIFE  AGENTS.  151 

The  Agent's  Relations  -with  the  Company. 

In  &  case  where  the  company  claimed  that  the  agents 
had  forfeited  all  claim  to  the  agency  and  renewal  com- 
missions by  a  violation  of  their  contract,  it  was  held — 

1.  That  a  general  agency  for  a  life  insurance  company 
is  revocable  at  the  will  of  either  party,  where  no  terms 
of  limitation  as  to  time  are  specified  in  the  contract  or 
letter  of  appointment. 

2.  It  is  also  competent  for  the  company  to  appoint 
other  agents  for  the  same  territory  where  no  terms  of 
exclusiveness  are  employed,  and  such  appointment  of 
other  agents  constitutes  no  ground  of  complaint,  unless 
it  be  shown  that  the  business  of  the  first  appointee  is 
substantially  interfered  with. 

3.  If  the  general  agents  abandon  any  part  of  their 
agency,  as  for  example  that  part  which  relates  to  the 
canvassing  for  applications,  it  is  in  law  the  abandon- 
ment of  the  whole  agency,  including  the  right  to  col- 
lect renewals. 

4  If  the  agent  is  removed  from  the  company  without 
cause,  he  will  still  retain  his  right  to  collect  the  renew- 
als, or  his  commissions  thereon,  provided  he  continues 
ready  and  willing  to  collect  them. 

5.  If  the  agent  is  guilty  of  any  misconduct  or  breach 
of  duty  in  his  business  as  agent,  or,  in  other  words,  if 
he  neglects  or  refuses  to  fulfill  the  instructions  of  the 
company,  which  form  a  part  of  the  contract  of  agency, 
especially  if  he  refuses  or  neglects  to  remit  funds,  or 
otherwise  make  prompt  returns  as  required,  01  if  he  ac- 
cepts another  agency  and  transfers  business  to  it,  he 
forfeits  all  interest  in  it,  and  claim  to  renewals  and  com- 
missions, and  cannot  maintain  an  action  on  account 
thereof. — Bigelow,  Life  and  Accident  Rep.,  vol.  2,  p.  149. 

In  another  case  the  doctrine  is  laid  down  that  if  an 
agent  should  grossly  misconduct  himself  in  the  course 

lieved  from  an  annoying  importunity  which  often  leads  them  to 
procure  policies  without  the  full  concurrence  of  their  judgments, 
and  in  opposition  to  their  best  interests. 

The  business  of  insurance  is  rapidly  increasing  in  magnitude 
and  importance,  and  it  is  as  essential  to  the  companies  themselves 
as  to  the  insured  that  the  rules  of  law  declared  applicable  to  them 
should  be  based  upon  just  and  equitable  principles,  and  adminis- 
tered in  harmony  with  the  doctrines  of  an  enlightened  jurispru- 
dence. It  is  quite  time  that  the  technical  constructions  which 
have  obtained  with  reference  to  contracts  of  this  kind,  blocking 
the  pathway  to  justice,  and  leading  to  decisions  opposed  to  the 
general  sense  of  mankind,  should  be  abandoned,  and  that  these 
corporations,  grown  opulent  from  the  scanty  savings  of  the  indi- 
gent, should  be  held  to  the  same  measure  of  responsibility  as  is 
exacted  from  individuals.— 2  Bigelow  Life  and  Ace.  Rep.,p,  698. 


152  INSTB UCTION  BOOK 

of  his  agency,  and  should  prove  unfaithful  to  his  trust, 
he  would  forfeit  his  claim  to  compensation  or  commis- 
sion, but  his  misconduct  must  be  gross  and  aggravated 
before  such  consequences  would  follow  ;  ordinary  or 
slight  misconduct  would  not  work  a  forfeiture  of  his 
commissions,  although  it  might  be  a  good  cause  for  the 
revocation  of  his  agency. 

It  was  also  shown  that  the  probable  expectancy  of  the 
life  of  the  policies  so  procured  would  be  from  eight  to 
thirteen  years,  and  taking  all  the  contingencies  of 
deaths  and  forfeitures  into  consideration,  they  would 
remain  in  force  at  least  ten  years.  It  was  also  shown 
'that  a  custom  prevailed  among  insurance  companies 
and  agents  by  which  agents  acquired  a  property  in  lists 
of  policies  procured  by  them. 

The  contract  of  agency  in  this  case  was  an  entire 
contract,  and  not  a  divisible  one,  that  is,  the  agent  has 
the  right  to  the  whole  of  the  renewal  commissions 
during  the  lifetime  of  the  policies,  and  the  contract 
was  not  one  which  is  renewable  from  year  to  year. — 
1  Sigelow,  Life  and  Ace.,  646. 

If  an  agent  makes  a  false  representation  of  the  affairs 
of  the  company  whereby  a  person  is  induced  to  effect 
insurance,  an  action  will  lie  against  the  company,  al- 
though no  pecuniary  damage  has  been  sustained  be- 
yond the  payment  of  premiums,  because  if  the  agent 
had  made  his  statements  according  to  the  truth,  the 
insurance  might  not  have  been  effected. 

Insurance  Brokers. 

A  broker  is  an  agent  employed  to  make  contracts  in 
matters  of  trade,  commerce  or  navigation,  for  a  com- 
mission commonly  called  a  brokerage.  While  a  factor 
may  sell  in  his  own  name  or  that  of  his  principal,  a 
broker  is  not  intrusted  with  the  possession  of  what  he 
has  to  sell,  nor  can  he  obtain  possession  of  what  he  is 
employed  to  purchase,  but  he  merely  acts  as  a  middle- 
man or  negotiator  between  the  two  parties.  In  life  in- 
surance a  broker  is  employed  simply  to  contract  for  and 
deliver  policies  to  the  persons  insuring,  and  to  receive 
the  premiums  due  on  them  ;  he  has  no  power  to  make, 
waive  or  alter  any  of  the  conditions  of  the  policy,  and 
in  all  cases  he  is  bound  so  to  conduct  himself  in  the 
business  he  undertakes  as  not  to  be  guilty  of  gross  neg- 
ligence. 

A  broker  is  agent  for  the  insured,  and  therefore  if  a 
broker  delivers  a  life  policy  and  collects  the  premium, 
but  fails  to  pay  it  to  the  company,  the  company  will 
not  be  liable  to  pay  the  loss  should  it  occur.  But 


EOR  LIFE  AGENTS.  153 

where  the  premium  is  paid  to  an  authorized  agent  of 
a  company,  it  is  liable. — Story  on  Agency,  §  28. 

The  Law  of  Contracts. 

Since  the  business  of  a  life  insurance  agent  is  to  ne- 
gotiate contracts  between  the  policy-holder  and  the  com- 
pany, it  is  important  that  he  should  know  the  general 
character  and  limits  of  contracts.  A  contract  is  de- 
fined at  common  law  to  be  an  agreement  between  two 
cr  more  persons  to  do  or  not  to  do  a  certain  thing.  It 
is  essential  to  the  validity  of  a  contract  to  have  the  as- 
sent of  both  parties,  but  if  one  of  the  parties  is  insane, 
under  duress  or  tinder  age,  or  in  any  way  disqualified  to 
give  a  rational  consent,  the  contract  is  voidable,  but  in 
these  cases  the  contract  will  bo  presumed  to  be  binding 
till  the  contrary  is  proved. 

The  assent  may  be  either  expressed  or  implied.  In 
the  latter  case,  if  a  person  recognizes  his  contract  as 
being  in  force  by  any  act  of  his  own,  even  by  implica- 
tion, then  it  is  binding.  If  a  company  should  make  a 
condition  that  a  policy  on  which  the  premiums  were 
not  paid  on  a  certain  day  should  be  forfeited,  and  yet 
should  continue  to  receive  them  after  the  period  of  pay- 
ment, it  would  be  an  impliedassent  to  new  terms  in  the 
contract.  *  The  assent  to  any  part  of  a  contract,  or  to 
any  violation  of  a  part  of  it,  may  be  tacit  as  well  as  ex- 
pressed, and  in  either  case  the  party  will  be  bound  by 
his  engagement. 

The  term  implied  contract  is  generally  used  to  denote 
a  promise  which  the  law,  from  the  existence  of  certain 
facts,  presumes  that  a  party  has  made.  When  a  man 
undertakes  any  office,  employment  or  duty,  the  law 
supposes  that  he  contracts  with  those  who  employ  or 
trust  him,  to  conduct  with  the  skill,  integrity  and  dili- 
gence he  professes  to  have,  and  if  through  negligence 
or  incapacity  he  fails,  the  other  party  has  his  remedy  in 
an  action  for  damages.  If  a  man  makes  a  contract  with 
a  life  insurance  company  to  manage  an  agency  for  a 
term  of  years,  and  it  is  agreed  that  he  shall  have  a  com- 
mission on  the  renewal  premiums  in  the  meantime,  ne- 
glect or  incapacity  to  make  the  agency  a  profitable  one 
is  a  sufficient  ground  to  enable  the  company  to  cancel 
the  contract  and  deprive  him  of  the  future  renewal  com- 
missions. 

An  absolute  contract  is  where  one  party  binds  himself 
positively,  without  any  conditions  to  its  performance. 

*  Decisions  on  this  point  vary  in  different  States. 


154  INSTRUCTION  BOOK 

A  conditional  contract  is  one  in  which  the  obligation  de- 
pends upon  the  fulfillment  of  some  condition.  A  life 
policy  is  a  conditional  contract,  dependent  upon  the 
truth  of  certain  stat^m^nts  made  in  the  application,  and 
the  subsequent  obsexvuijce  of  those  conditions  in  the 
policy  which  forbid  his  exposing  his  life  in  certain  dan- 
gerous occupations  or  practices  which  shorten  life. 

It  is  essential  to  a  contract  that  it  be  founded  on  a 
sufficient  and  lawful  consideration.  A  mere  voluntary 
offer  to  do  a  thing  is  not  a  contract.  Something  must 
be  given  in  exchange  between  the  parties — there  must 
be  some  mutuality  in  the  bargain  to  make  it  binding. 
This  rule  applies  to  all  contracts  and  agreements  not 
under  seal,  with  the  exception  of  bills  of  exchange  and 
negotiable  notes  after  they  have  been  negotiated.  It  is 
not  necessary  that  the  consideration  be  something  tan- 
gible ;  any  damage,  or  suspension,  or  forbearance  of 
right,  or  a  promise  to  do  a  thing  in  a  certain  contin- 
gency, or  a  mutual  promise,  is  a  sufficient  considera- 
tion, provided  the  mutual  promises  are  concurrent  in 
point  of  time.  A  promise  by  a  company  to  pay  a  sum 
of  money  to  the  heirs  of  the  insured  in  case  of  his 
death  is  a  sufficient  consideration  for  an  annual  premi- 
um. The  death  may  take  place  at  any  time,  and  the 
company  must  hold  itself  liable  to  pay  the  policy  even 
at  a  great  disadvantage  to  itself. 

A  contract  valid  by  the  law  of  the  place  where  it  is 
made,  is,  generally  speaking,  valid  everywhere  by  the 
law  of  nations  and  by  tacit  consent. 

All  contracts  will  be  considered  to  be  in  force  from 
the  day  of  date,  or  the  completion  of  the  contract,  un- 
less the  contrary  be  proven.  But  the  contract  will  be 
binding  if  the  date  is  at  variance  with  the  delivery. 
Since  the  payment  of  the  first  premium  is  always  a 
condition  precedent  to  the  delivery  and  obligation  of  a 
life  policy,  it  is  this,  rather  than  the  date,  which  deter- 
mines when  it  begins  to  be  in  force,  but  when  once  in 
force  it  will  take  effect  from  the  date  by  relation. 

An  escrow  is  an  obligation  made  by  one  party  and  de- 
livered to  an  agent  or  stranger  to  hold  till  certain  con- 
ditions are  performed,  and  then  to  be  delivered  to  the 
person  for  whom  the  obligation  was  made.  A  policy  of 
insurance  made  by  the  company,  but  stating  that  it  is 
not  binding  till  countersigned  by  an  agent,  is  an  es- 
crow, and  the  policy  is  not  perfected  till  thus  signed, 
and  as  long  as  it  remains  in  the  agent's  hands  it  is  not 
binding  on  the  company,  (although  some  recent  de- 
cisions hold  to  a  contrary  doctrine, )  but  if  the  policy  is. 
delivered  to  the  policy-holder  without  the  agent's  sig- 


FOR  LIFE  AQEN1S.  155 

nature,  the  law  considers  that  this  condition  has  been 
•waived,  and  in  case  of  death  the  claim  will  have  to  be 
paid.  Agents,  therefore,  should  never  sign  policies  re- 
maining in  their  hands  until  the  premium  is  actually 
paid. 

When  a  claim  is  made  upon  a  contract  in  writing  it 
is  necessary  that  the  party  claiming  under  it  should 
produce  it,  and  no  parol  evidence  will  be  of  any  avail  to 
substantiate  its  terms.  If  the  insured  loses  his  policy, 
or  if  it  is  destroyed  by' fire,  he  should  immediately  state 
the  fact  to  the  company  and  obtain  a  duplicate,  for,  in 
case  of  death,  the  claim  would  not  be  paid  without  the 
surrender  of  the  policy. 

It  is  a  fundamental  principle  in  law  that  parol  evidence 
will  not  be  taken  to  contradict,  vary  or  explain  a  writ- 
ten contract,  or  to  show  it  to  be  different  from  what  it 
purports  to  be  on  the  face  of  it,  except  in  the  single  in- 
stance of  latent  ambiguity.  When  two  parties  have 
reduced  a  contract  to  writing,  it  is  presumed  to  con- 
tain the  whole  of  it,  that  the  parties  have  deliberately 
weighed  every  word,  and  each  sentence  expresses  its 
full  meaning,  and  to  admit  parol  evidence  would  de- 
stroy all  the  advantages  of  writing.  Every  agreement 
must  receive  its  construction  from  its  own  terms  with- 
out the  intervention  of  any  evidence  foreign  to  it,  un- 
less it  be  to  explain  the  meaning  of  some  words  and 
how  they  are  used  in  the  business.  It  has  been  decid- 
ed that  a  policy  of  insurance  must  be  interpreted  ac- 
cording to  the  words  of  the  policy,  and  cannot  be  va- 
ried by  the  words  or  promises  of  any  pamphlets  or  cir- 
culars issued  by  the  company. 

Contracts  should  be  construed  so  as  to  give  effect  to 
real  intention  of  the  parties  so  far  as  it  can  be  ascer- 
tained. When  parties  make  a  contract  they  have  a  de- 
finite end  in  view /something  which  is  to  their  mutual 
advantage,  and  it  should  be  construed,  so  that  their  real 
intention  should  prevail.  The  construction  should  be 
reasonable  without  ambiguity,  and  the  words  are  to  be 
understood  according  to  the  meaning  in  which  they  are 
generally  employed.  Where  there  is  no  ambiguity  in 
the  language,  none  should  be  admitted  in  the  explana- 
tion. Bad  grammar  or  bad  spelling  does  not  vitiate  a 
contract  if  the  real  intention  of  the  parties  can  be  un- 
derstood. The  construction  should  be  made  on  the 
whole  contract,  and  not  on  the  separate  parts.  When 
the  words  are  doubtful,  the  first  thing  to  be  inquired 
into  is  the  intent  of  the  parties,  and  if  that  intent  is 
plain  and  manifest,  such  construction  ought  to  be  put 
upon  them  as  will  best  answer  the  intention  ;  and  if 


156  INSTRUCTION  BOOK 

words  bear  two  senses,  they  ought  to  be  understood  in 
the  sense  which  is  most  agreeable  to  the  nature  of  the 
contract,  and  anything  ambiguous  may  be  explained  by 
the  common  use  of  the  terms  of  the  country  where  the 
contract  was  made. 

In  interpreting  contracts  words  should  be  taken  most 
strongly  against  the  grantor  and  in  favor  of  the  other 
party;  thus  in  the  construction  of  a  life  policy  the  mean- 
ing  will  be  construed  as  favorably  as  possible  toward  the 
policy-holder,  because  the  company  writes  the  policy 
and  is  supposed  to  exercise  all  due  deliberation  in  it.  It 
seems,  then,  that  the  same  rule  should  apply  in  con- 
struing the  application  when  made  a  part  of  the  policy, 
and  that  this  should  be  taken  most  strongly  against  the 
policy-holder. 

But  this  rule  does  not  go  so  far  as  to  authorize  a  con- 
struction against  the  promissor  merely  because  that  view 
is  possible.  On  the  contrary,  in  the  absence  of  any- 
thing to  show  that  the  terms  of  such  contract  are  in- 
tended to  be  understood  in  a  particular  or  special  sense, 
courts  will  go  no  further  than  to  hold  the  promissor  lia- 
ble to  the  extent  which  the  other  party  had  a  right  to 
understand  from  the  terms  of  the  instrument  when 
viewed  in  their  ordinary  and  commonly-received  accept- 
ation. 

A  policy  of  insurance,  like  other  contracts,  should  be 
construed  according  to  the  sense  in  which  the  parties 
are  supposed  to  have  understood  it  at  the  time  it  was 
entered  into,  and  they  will  be  presumed  to  have  un- 
derstood it  in  the  sense  that  men  of  ordinary  intelli- 
gence ought  to  have  understood  it. 

Life  Insurance  not  an  Indemnity. 

An  insurance  upon  life  has  but  a  remote  resemblance 
to  fire  or  marine  insurance.  In  the  latter  the  particu 
lar  object  is  to  indemnify  against  a  pecuniary  loss,  the 
contract  being  to  pay  whatever  is  lost  not  exceeding  a 
certain  specified  sum.  But  life  insurance  is  a  contract 
to  pay  a  certain  sum  stated  in  the  policy  at  the  death  of 
the  policy-holder,  or  at  a  certain  time  which  may  or  may 
not  occasion  a  pecuniary  loss.  The  policy-holder  may 
be  insane  or  totally  incapacitated  from  all  labor  and 
usefulness,  but  this  makes  no  difference,  the  money- 
value  of  the  life  is  stated  and  agreed  upon  in  the  policy, 
and  the  company  is  bound  for  the  whole  amount.  If 
any  other  rule  were  adopted,  if  the  friends  of  the 
policy-holder  were  to  receive  only  the  sum  which  would 
compensate  for  the  pecuniary  loss  they  sustained,  poli- 


FOR  LIFE  AQENT8.  157 

cies  would  seldom  bo  kept  in  force  after  the  productive- 
ness of  the  insured  began  to  decline. 

Payment  of  Premium. 

It  may  be  said  that  it  is  a  fundamental  principle  in 
life  insurance  that  the  premium  must  be  paid  in  ad- 
vance, or  the  policy  will  lapse  unless  the  payment  is 
waived  or  deferred.  The  reason  of  this  is  very  clearly 
stated  in  the  following  extract  from  a  judicial  decision  : 

A  policy  of  insurance  is  in  one  sense  a  one-sided  contract.  The 
payment  of  an  annual  premium  insures  the  life  for  a  year.  Af 
the  end  of  the  year  the  company  is  bound  to  receive  the  premium 
If  tendered  ;  the  insured  is  not  bound  to  pay  it.  To  continue  the 
igreement  from  year  to  year  is  at  the  option  of  the  insured.  The 
premiums  are  the  fund  relied  upon  for  the  losses  incurred.  If  the 
insured  ceases  to  contribute  to  the  fund,  it  must  be  presumed 
that  he  will  not  claim  its  benefit.  The  company  must  know  at  the 
stipulated  day  whether  the  agreement  is  to  continue.  The  pay- 
ment of  the  premium  advises  them.  If  not  paid  at  the  time,  oi 
necessity  the  company  must  conclude  it  never  will  be  paid.  They 
dare  not  calculate  on  probabilities.  No  life  insurance  company 
can  do  business  for  a  single  year  on  any  other  principle.  To  at- 
tempt it  must  be  to  forfeit  the  confidence  of  the  people.  The  in- 
surance is  accepted  on  these  terms.  They  form  a  part  of  the 
written  contract  upon  which  the  claim  for  the  benefit  of  it  is 
based.  Clearly,  the  object  of  the  provision  is  not  merely  to  se- 
cure the  payment  of  premium.  It  may  prevent  the  payment  of 
premium  when  overdue,  otherwise  those  interested  might  claim 
the  sum  insured,  though  the  insured  had  died  with  his  premium 
unpaid.  The  prompt  and  punctual  payment  of  the  premium  is  the 
very  substance  of  the  contract. — 2  Bigelow,  Life  and  Ace.  Rep.,  150. 

No  excuse  or  accident  will  be  allowed  to  set  aside  this 
rule  unless  there  is  a  stipulation  in  the  policy,  or  unless 
there  is  a  subsequent  agreement  to  this  effect.  A  pol- 
icy-holder going  to  the  office  of  the  company  to  pay  his 
premium  on  the  last  day  that  it  was  due,  was  stricken 
down  by  paralysis  and  died  the  next  day  without  hav- 
ing paid  it.  Meanwhile  the  company  declared  the  pol- 
icy to  be  forfeited,  and  the  court  held  that  it  would  not 
have  been  held  liable  for  the  claim,  unless  there  had 
been  a  special  stipulation  to  waive  the  payment  a 
short  time  in  case  he  was  not  able  to  pay  it  when 
due. 

A  premium  received  by  a  company  after  the  death  of 
the  insured  and  after  the  time  of  payment  has  expired, 
the  company  being  ignorant  of  the  death  of  the  policy- 
bolder,  will  not  revive  a  policy.  The  premium  is  for 
the  future  insurance  of  the  policy-holder  while  living, 
and  after  he  dies  it  is  too  late  to  correct  mistakes. 

Where  a  note  was  given  for  half  a  premium  on  a  pol- 


158  INSTRUCTION  SO OS 

icy  where  the  premium  was  payable  strictly  in  advance, 
and  the  note  was  not  paid  at  maturity,  it  was  held  that 
the  company  was  not  liable  when  the  insured  died  after 
the  note  became  due. 

When  a  premium  is  payable  by  quarterly  installments, 
the  non-payment  of  one  of  the  installments  on  the  day 
it  is  due  will  cause  the  forfeiture  of  the  policy. 

When  the  premium  is  paid  subsequently  to  the  date 
and  issuance  of  the  policy,  the  policy  takes  effect  by 
relation  from  the  time  when  the  contract  was  made, 
though  it  is  provided  that  the  policy  shall  not  be  bind- 
ing till  the  premium  is  paid. 

The  premium  must  be  paid  when  it  is  due,  and  to 
some  one  authorized  to  receive  it,  otherwise  the  policy 
may  be  forfeited  ;  but  if  the  premium  is  tendered  to  an 
authorized  agent  of  the  company  before  it  is  due,  and 
he  refuse  to  receive  it,  the  policy  will  be  binding  al- 
though it  is  not  paid. 

Delivery  of  Policy. 

A  delivery  of  the  policy  as  well  as  the  payment  of  the 
first  premium  is  necessary  in  order  to  make  it  binding 
on  the  company.  Where  the  terms  of  a  policy  required 
the  first  premium  to  be  paid  in  cash  as  a  condition  pre- 
cedent, and  the  applicant  gave  his  note  as  payment  of 
the  cash  premium  till  the  policy  should  arrive,  and  the 
partj7  fell  sick  and  died,  so  that  the  policy  was  not  de- 
livered, it  was  held  that  the  policy  was  not  binding  be- 
cause one  of  the  conditions  was  not  fulfilled  ;  that  the 
applicant  would  pay  the  premium  when  the  policy  ar- 
rived and  was  delivered,  and  that  till  this  payment  and 
delivery,  the  policy  was  merely  an  escrow  or  unfinished 
contract  in  the  hands  of  the  agent 

"Warranty  and  Representation. 

In  order  to  form  a  contract  of  insurance  intelligently, 
it  is  nece'ssary  for  the  company  to  have  definite  know- 
ledge of  the  physical  condition  of  the  person  to  be  in- 
sured. The  applicant  for  insurance  makes  certain  state- 
ments respecting  his  health,  physical  condition,  and 
former  manner  of  life,  and  upon  these  statements  the 
company  decides  whether  to  accept  or  to  reject  the  ap- 
plication. These  statements  must  be  true,  or  else  a 
fraud  is  committed,  and  the  law  decides  that  the  person 
insured  warrants  them  to  be  so.  "  A  warranty  in  a 
policy  of  insurance  is  a  condition  or  contingency,  and 
unless  it  be  performed,  there  is  no  contract  It  is 


FOB  LIFE  AGENTS.  159 

styled  a  condition  precedent,  which  means  that  it  is  per- 
fectly immaterial  for  what  purpose  a  warranty  is  intro- 
duced, and  that  no  contract  exists  unless  the  warranty 
be  literally  complied  with." 

A  representation  is  a  "verbal  statement  made  by  the 
assured  to  the  company  before  the  subscription  to  the 
policy  as  to  the  existence  of  some  fact  or  state  of  facts 
tending  to  induce  the  company  more  readily  to  insure 
the  risk,  by  diminishing  the  estimate  it  would  otherwise 
have  formed  of  it."  It  belongs  to  some  matter  extrinsic 
to  the  contract,  and  generally,  if  not  always,  relates  to 
the  present  condition  of  the  subject  insured. 

Chncealment  or  misrepresentation.  The  rule  of  law  is 
that  the  insured,  as  well  as  the  agent  whom  he  employs 
to  effect  the  insurance,  should  give  an  unreserved  and 
full  statement  of  all  the  material  facts,  whether  he  is  re- 
quired by  the  company  to  give  it  or  not,  unless  it  ex- 
pressly dispenses  with  it.  The  law  considers  the  under- 
taking of  insurance  to  be  a  contract  upon  speculation, 
or  without  any  definite  knowledge  of  the  results,  and  in 
order  to  form  a  proper  estimate  of  the  risk  insured,  and 
to  compute  accurately  the  compensation  which  ought  to 
be  paid,  a  knowledge  of  all  important  points  is  most  es- 
sential to  the  company. 

These  facts  are  almost  invariably  within  the  know- 
ledge of  the  insured,  and  a  communication  of  them  is 
most  justly  and  wisely  imposed  as  a  positive  duty  on 
him  by  the  law.  He  is  required  to  act  in  the  purest 
good  faith,  and  his  omission  to  mention  any  material 
fact  which  might  influence  the  company  in  estimating 
the  premium  or  accepting  the  insurance,  although  it 
may  have  arisen  from  mistake  or  heedlessness,  or  from 
a  bona-fide  belief  that  it  was  quite  irrelevant,  will  be 
fatal* 

Thus  if  a  party  asking  to  be  insured  is  in  the  habit  of 
eating  opium,  the  fact  should  be  stated  by  him  even 
though  not  specially  asked  by  the  company. 

Every  agent  and  applicant  should  clearly  understand 
that  in  case  of  concealment  or  misrepresentation,  as  in 
case  of  warranty,  the  question  of  materiality  is  not  reg- 
ulated by  the  event,  and  that  although  death  may  arise 
from  causes  totally  unconnected  with  the  circumstances 
which  have  been  omitted  to  be  mentioned,  or  have  been 
misrepresented,  the  contract  will  equally  be  vitiated,  t 

But  later  authorities  do  not  appear  to  be  quite  as 
strict,  in  that  they  require  the  misrepresentation  to  be 

*  Angell  on  Fire  and  Life  Insurance,  §  307. 
t  Ibid.,  §  321. 


160  INS TR  UCTION  BOOR 

material  to  the  risk,  while  in  warranty  it  is  not  so.  Mr. 
Justice  Welb  of  Massachusetts  says  : 

"  Representations  to  insurers,  before  and  at  the  time 
of  making  a  contract,  are  a  presentation  of  the  elements 
upon  which  to  estimate  the  risk  proposed  to  be  as- 
sured. If  wrongly  presented  in  any  respect  material  to 
the  risk,  the  policy  that  may  be  insured  upon  will  not 
take  effect." 

And  another  authority  holds  that  "  fraud  is  an  ele- 
ment which  vitiates  every  contract,  and  a  want  of  truth 
in  a  representation  is  fatal  or  not  to  the  insurance,  as  ii 
happens  to  be  material  or  not  material  to  the  risk  un- 
dertaken; but  when  a  thing  is  warranted  to  be  of  a  par- 
ticular nature  or  description,  it  must  be  exactly  as  rep- 
resented, otherwise  the  policy  is  void  and  there  is  no 
contract ;  and  this  may  be  considered  as  a  first  princi- 
ple in  the  law  of  insurance." 

But  the  mere  omission- of  the  insured  to  state  matter 
not  called  for  by  any  specific  or  general  question,  would 
not  be  a  concealment  and  would  not  vitiate  the  policy . 
The  presumption  is  that  the  company  questions  the 
party  upon  all  subjects  which  it  deems  material,  and  be- 
yond that  the  party  is  not  bound  to  disclose. 

Insurable  Interest. 

The  party  for  whose  benefit  a  policy  is  written  must 
have  an  interest  in  the  life  of  the  insured,  that  is,  it 
must  be  shown  that  the  death  of  the  latter  will  be  a 
damage,  either  pecuniary  or  otherwise,  to  the  former. 
This  is  termed  "  insurable  interest,"  and  it  is  necessary 
in  ordej  to  hold  the  company  liable.  If  this  is  wholly 
wanting,  as  where  a  man  pays  the  premiums  on  the  life 
of  another  who  does  not  owe  him  anything  and  is  not 
related  to  him,  the  contract  of  insurance  is  a  wagering 
policy,  a  mere  bet  that  he  will  die,  and  moreover,  it  is 
for  the  interest  of  the  party  paying  the  premiums  that 
he  should  die,  and  instances  have  occurred  in  which 
means  have  been  taken  to  hasten  this  event  when  lives 
were  insured  with  wagering  policies.  By  the  laws  of 
England  and  several  of  the  States  of  the  Union  such 
policies  are  void. 

This  iusurable  interest  may  or  may  not  be  a  pecunia- 
ry one.  It  is  a  sufficient  basis  for  a  contract  of  life  in- 
surance if  in  the  ordinary  course  of  events  loss  and  dis- 
advantage will  probably  arise  to  the  party  in  whose  fa- 
vor the  policy  is  written,  from  the  death  of  «the  party 
insured  ;  and  the  amount  of  loss  and  disadvantage  is 
held  in  law  to  be  the  sum  insured.  A  bona-fide  cred- 


FOR  LIFE  AGENTS.  161 

itor  bus  an  insurable  interest  in  his  debtor's  life  to  the 
amount  of  his  debt,  for  that  is  a  probability  more  or 
loss  remote  that  the  debtor  would  pay  the  debt  if  he 
lived.  When  a  member  of  a  firm  promises  to  contrib- 
ute his  labor  and  skill  in  an  enterprise  or  business  op- 
eration, the  other  partners  who  furnish  the  capital  have 
an  insurable  interest  in  his  life,  because  if  he  should 
die,  the  business  would  suffer.  A  newspaper  firm  in 
New  York  held  some  very  large  policies  on  the  life  of 
its  principal  editor,  and  a  prominent  church  in  Brook- 
lyn has  insured  the  life  of  its  pastor  for  the  benefit  of 
the  society  for  a  large  amount.  If  a  sister  without  pro- 
perty of  her  own,  or  means  of  support,  depends  upon 
her  brother  for  a  living,  this  dependence  on  him  is  suf- 
ficient to  constitute  an  insurable  interest.  A  wife  al- 
ways has  an  insurable  interest  in  the  life  of  her  hus- 
band, and  may  recover  thereupon  without  other  proof 
than  that  of  the  relation  between  them.  She  has  a 
clear  legal  right  to  support  and  maintenance  so  long  as 
she  may  live.  So  a  father  who  is  entitled  to  the  earn- 
ings of  his  minor  son  has  an  insurable  interest  in  his 
life.  On  this  point  Chief  Justice  Shaw  of  Massachu- 
setts says  : 

"  We  cannot  doubt  that  a  parent  has  an  interest  in 
the  life  of  a  child,  and  vice  versa  a  child  in  the  life  of  a 
parent,  not  merely  on  the  ground  of  a  provision  of  law, 
that  parents  and  grandparents,  children  and  grandchild- 
ren, are  bound  to  support  their  lineal  kindred  when  they 
may  stand  in  need  of  relief,  but  upon  considerations  of 
strong  morals,  and  the  force  of  natural  affection  between 
near  kindred,  operating  often  more  efficaciously  than 
those  of  positive  law." 

"  Whatever  may  be  the  nature  of  such  interest,  and 
whatever  the  amount  insured,  it  can  work  no  injury  to 
the  insurers,  (the  company,)  because  the  premium  is 
proportioned  to  the  amount,  and  whether  the  insurance 
be  to  a  large  or  a  small  amount,  the  premium  is  com- 
puted to  be  a  precise  equivalent  for  the  risk  taken.  Per- 
haps it  would  be  difficult  to  lay  down  any  general  rule 
as  to  the  nature  and  amount  of  interest  the  assured  must 
have.  One  thing  must  be  taken  as  settled,  that  every  man 
has  an  interest  in  his  own  life  to  any  amount  in  which 
he  chooses  to  value  it,  and  may  insure  it  accordingly. " 

If  a  wife  has  a  policy  on  the  life  of  her  husband,  the 
fact  that  they  subsequently  divorced  will  not  invalidate 
the  policy.  If  there  was  an  insurable  interest  at  the 
time  that  the  insurance  was  effected,  the  fact  that  it  has 
ceased  will  not  relieve  the  company  from  liability. 

Waiver.    Although  the  companies  make  certain  con- 


162  INSTR  UCTION  B 0 OK 

ditions  in  their  policies,  and  insert  a  clause  that  the  po- 
licy will  be  forfeited  if  these  conditions  are  not  com- 
plied with,  yet  the  company  may  waive  any  of  these 
conditions  when  violated  either  directly  by  granting 
permission,  or  constructively  by  some  act  which  the  law 
will  consider  a  waiver.  A  forfeiture  for  the  non-pay- 
ment of  premium  when  due,  is  waived  by  the  subse- 
quent receipt  of  the  premium  without  objection.  If  an 
agent  delivers  a  policy  without  countersigning  it,  the 
company  will  be  held  responsible  if  the  policy-holder 
dies,  and  the  law  will  regard  this  requirement  as  being 
waived.  The  same  is  true  respecting  any  other  condi- 
tions of  the  policy,  but  the  waiver  must  be  clearly  es- 
tablished by  some  act  of  the  company  or  its  agent,  for 
it  will  not  be  implied.  The  law  prefers  to  maintain  the 
contract  as  originally  written  rather  than  to  make  a  new 
one  by  the  act  of  either  party.  Whether  the  acts  were 
done  which  constitute  waiver,  are  questions  of  fact  for 
the  jury  to  decide,  but  the  sufficiency  of  these  facts,  or 
what  amounts  to  waiver,  are  questions  of  law. 

If  the  agent  waives  the  cash  payment  on  a  premium, 
and  takes  the  individual  note  of  the  policy-holder  in 
payment,  although  he  does  not  deliver  the  policy,  the 
insurance  is  complete,  and  the  amount  of  the  policy 
can  be  recovered  the  same  as  if  the  premium  was  paid 
in  cash,  and  the  policy  delivered.  But  the  note  must 
be  taken  as  payment,  and  not  merely  as  a  memorandum 
that  the  cash  will  be  paid  when  the  policy  is  delivered. 

Assignment. 

A  life  insurance  policy  may  be  assigned  like  any  other 
contract  unless  there  is  some  stipulation  in  it,  or  some 
special  statute  law  which  prevents  its  being  disposed  ol 
in  this  way.  A  person  may  make  an  assignment  by  a 
mere  deposit  of  the  policy,  by  an  indorsement  on  it,  or 
by  a  separate  deed  of  assignment.  But  to  constitute  a 
valid  assignment  by  indorsement  upon  a  policy,  there 
must  be  a  delivery  of  the  instrument. 

When  a  policy  is  assigned,  notice  should  be  immedi- 
ately given  to  the  company,  in  order  to  prevent  the  as- 
signees in  bankruptcy  or  insolvency  from  acquiring 
rights  which  would  impair  or  destroy  the  title  of  the  as- 
signee, and  any  third  party  taking  a  subsequent  assign- 
merit  should  give  the  earliest  notice  to  the  insurers,  and 
not  having  notice  of  the  prior  transfer,  would  acquire  a 
superior  title.  No  special  form  of  notice  to  the  compa- 
ny is  necessary;  it  is  sufficient  if  the  information  is  con- 
veyed to  it  in  a  clear  and  unmistakable  manner. 


FOR  LIFE  AGENTS.  163 

When  a  policy  is  assigned  to  a  purchaser  for  a  consider- 
ation, he  is  entitled  to  the  whole  amount  of  the  policy, 
and  it  is  not  material  whether  he  paid  a  full  consideration 
upon  such  transfer  or  not.  Such  liability  in  no  manner 
depends  upon  the  amount  of  consideration  of  the  as- 
signments. 

In  a  leading  English  case  it  was  held  that  the  law 
prohibiting  insurance  by  persons  having  no  interest  in 
the  life  insured,  had  no  application  to  the  assignment 
of  a  subsisting  policy,  but  that  the  assignee  in  good 
faith  of  a  policy  upon  life,  which  was  good  when  effect- 
ed, is  entitled  in  all  cases  to  demand  payment  of  the 
whole  sum  insured. 

The  claim  of  the  assignee  when  the  insured  person 
dies  is  good  against  all  other  creditors.  On  this  point 
Mr.  Justice  McKinney  of  Tennesee  says  :  "  Upon  the 
death  of  the  assured  all  contingency  is  at  an  end,  and 
the  payment  of  the  money  becomes  an  absolute  uncon- 
ditional obligation  on  the  part  of  the  insurer,  and  the 
policy  becomes  invested  with  all  the  essential  proper- 
ties of  a  promissory  note  on  the  legal  evidence  of  death. 
And  if  we  are  right  in  assuming,  as  we  have,  that  the 
legal  effect  of  the  assignment  of  the  policy  was  to  in- 
vest the  assignee  with  the  legal  interest  in  the  policy, 
then  the  conclusion  is  demonstrated  that  he  alone,  as 
against  the  personal  representative,  creditors,  and  all 
other  persons,  is  entitled  to  receive  the  money  due  on 
the  policy.  In  this  view  the  assignee  of  the  policy 
stands  upon  the  same  footing  as  the  assignee  of  a  bond, 
bill  or  note,  and  like  them  it  may  be  assigned  without 
the  knowledge  and  against  the  will  of  the  debtor." 

Where  the  company  requires  notice  of  an  assignment 
to  be  given  to  it,  the  assignment  is  valid  if  notice  is  not 
given  until  after  the  death  of  the  assured. 

When  a  policy  on  the  life  of  the  husband  is  the  sole 
and  separate  property  of  the  wife,  it  is  assignable  by 
her  in  equity,  the  same  as  any  other  personal  property. 
40  111.,  398.  This  is  the  case  in  the  absence  of  any  spe- 
cial statute  to  the  contrary,  but  in  New  York  such  as- 
signments are  invalid.  Such  a  policy  is  an  exception  to 
the  general  rule,  and  is  strictly  regulated  by  local  stat- 
ute laws; 

Prospectus 

A  prospectus,  advertisement  or  leaflet  setting  forth 
the  condition  of  the  company,  the  terms  of  insurance 
or  advantages,  forms  no  part  of  the  policy  and  is  not 
binding  upon  the  company.  Such  preliminary  matter  is 


164  fN8 TR UCTION  BOOK 

never  admitted  where  the  terms  of  the  contract  are 
clear  and  explicit.  On  this  point  Judge  Selden  of  New 
York  holds  that  "there  is  not  the  slightest  authority 
for  holding  that  any  preliminary  or  collateral  writing 
whatever,  which  is  neither  annexed  to  nor  referred  to  in  the 
policy,  can  be  taken  as  a  part  of  the  contract  of  insur- 
ance, and  the  general  principles  of  law  are  opposed  to 
any  such  doctrine." 

The  policy  and  the  application  must  be  considered 
as  the  entire  contract  between  the  two  parties,  and  all 
other  statements  used  in  persuading  the  insured  to  take 
a  policy,  as  well  as  the  language  and  conversation  of 
the  agent,  is  mere  preliminary  matter,  which  is  not  bind- 
ing unless  actually  incorporated  in  the  policy. 

Policy-holder  not  heard  from. 

When  a  person  insured  has  not  been  heard  from  for 
some  time,  the  question  arises  whether  he  is  alive  or 
dead,  and  whether  the  company  is  liable  for  the  amount 
of  the  policy  without  any  further  proof  of  his  death. 
This  is  a  question  of  fact  which  must  be  determined  by 
the  jury.  All  authorities  agree  that  the  common  law  is 
that  the  presumption  of  life  with  regard  to  persons  of 
whom  no  account  can  be  given,  ends  at  the  expiration 
of  seven  years  from  the  time  they  were  last  known  to 
be  living,  and  that  after  this  period  the  burden  of  proof 
devolves  upon  the  company  insuring  him.  The  circum- 
stances upon  which  the  jury  are  to  find  the  verdict  are 
the  age  of  the  party,  his  situation,  habits,  employment, 
state  of  health,  physical  constitution,  the  place  or  cli- 
mate of  the  country,  whether  he  went  by  sea  or  by  land, 
the  facility  of  communication  between  that  country  and 
his  former  home  ;  in  short,  any  circumstances  tending 
to  aid  in  finding  the  fact  of  life  or  death.  There  must 
also  be  evidence  that  diligent  inquiry  has  been  made 
among  his- relatives,  or  at  the  place  of  his  foreign  resi- 
dence, if  known,  to  ascertain  if  he  is  living. 

The  statutes  of  New  York  and  Pennsylvania  adopt 
the  English  rule,  that  when  a  person  has  been  absent 
from  home  for  seven  years,  without  being  heard  of,  and 
diligent  inquiries  have  been  made  at  his  last  known  place 
of  residence,  without  success,  he  shall  be  considered  as 
dead. 

Violation  of  Conditions. 

When  a  policy  contains  certain  conditions,  the  viola- 
tion or  non-performance  of  any  of  them  will  vitiate  it. 


FOR  LIFE  AGENTS.  1«5 

A  person  who  had  special  permission  to  make  a  voy- 
age to  California  and  return  by  way  of  Cape  Horn  or 
Vera  Cruz,  was  said  to  have  vitiated  the  policy  because 
he  returned  by  way  of  Chagres,  although  he  arrived 
here  safe  and  sound.  The  policy  fixed  the  condition 
upon  which  it  should  be  binding  and  upon  which  it 
should  be  annulled,  and  there  having  been  a  breach  in 
the  condition,  it  was  thereby  rendered  void.  So  when 
the  Protestant  Episcopal  bishop  of  Rhode  Island  went 
into  a  Southern  State,  and  remained  ten  days  when  the 
conditions  of  his  policy  only  allowed  him  to  remain 
five,  it  was  held  that  the  policy  was  forfeited. 

If  a  person  having  an  insurance  on  his  life  commit 
a  felony  for  which  he  is  tried,  convicted  and  executed, 
the  policy  is  rendered  void,  although  it  contain  no  con- 
dition to  this  effect.  It  has  been  held  that  to  pay  a 
claim  of  this  kind  would  be  contrary  to  public  policy 
and  sound  morals. 

Since  the  courts  and  public  opinion  hold  the  com- 
panies strictly  responsible  to  pay  every  just  claim,  no 
matter  how  much  greater  it  may  be  than  the  premiums 
it  has  received,  it  is  only  just  and  equitable  that  the 
policy-holder  should  be  held  to  as  strict  an  account  for 
his  conduct  while  he  is  insured.  He  holds  possession 
of  the  policy,  its  contents  can  be  read  at  anytime,  and 
there  is  no  excuse  for  his  violating  them. 


Rights  of  Married  Women. 

Under  the  statutes  of  New  York,  Massachusetts,  Con- 
necticut and  some  other  States,  a  policy  of  insurance 
made  on  the  life  of  the  husband  for  the  benefit  of  the 
wife  and  her  children  in  case  of  her  death,  cannot  be 
assigned  or  transferred,  so  as  to  defeat  their  interest  in 
it.  The  statutes  evidently  intend  that  provision  should 
be  made  for  her  and  her  children  in  a  state  of  widow- 
hood and  orphanage,  should  such  a  condition  occur, 
since  this  was  tho  evident  object  of  the  husband  when 
he  took  the  policy. 

At  common  law  a  man  could  insure  his  life  to  any 
amount  which  the  company  was  willing  to  take  and 
and  for  which  he  would  pay  the  annual  premium,  but 
subsequent  statutes  have  been  enacted  that  if  one 
wished  to  insure  the  life  of  another,  he  could  only  in- 
sure to  the  interest  he  had  in  such  other  life.  This 
principle  the  legislatures  have  relaxed  in  respect  to  in- 
surance effected  by  a  married  woman  on  the  life  of  her 
husband  for  any  sum  which  she  and  the  insurance 
company  see  fit  to  contract  for.  It  is  also  provided 


166  INSTRUCTION  BOOK 

that  in  case  of  her  surviving  her  husband,  the  amount 
payable  in  the  terms  of  the  policy  should  be  payable  to 
her,  for  her  own  use,  free  from  all  claims  of  the  repre- 
sentatives of  her  husband  or  his  creditors.  In  some 
States  this  is  limited  to  the  case  where  the  annual  pre- 
mium is  not  over  $300.  In  these  acts  the  contract  is 
continued  to  the  children  of  the  assured  wife  after  her 
death.  This  provision  is  a  special  and  a  peculiar  one, 
and  looks  to  a  state  of  widowhood  and  for  the  orphan 
children,  and  it  would  be  a  violation  of  the  spirit  of 
the  provision,  to  hold  that  a  wife  insured  under  this  act 
could  sell  or  traffic  with  her  policy  as  though  it  was 
realized  personal  property  or  an  ordinary  security  for 
money. 

In  such  a  policy  the  intention  is  not  to  give  a  sum  of 
money  to  the  children  after  the  wife  dies,  but  to  make 
a  life  policy,  in  a  certain  event,  payable  to  them,  and 
the  intention  is  not  only  expressed  but  executed.  This 
is  evidently  the  intention  of  the  statute  law,  and  it  is 
against  public  policy  to  allow  its  provisions  to  be  de- 
feated by  any  assignments  or  transfers  to  other  parties. 
A  life  policy  made  in  this  manner  is  not  testamentary 
in  its  nature  and  therefore  revocable.  It  is  not  a  will, 
but  a  contract  in  behalf  of  the  wife  and  children,  au- 
thorized and  regulated  by  statute,  and  when  once  en- 
tered into,  is  no  more  revocable  than  a  promissory  note 
would  be  which  was  made  payable  to  the  children  af- 
ter the  death  of  the  mother. 

This  provision  or  intention  of  the  law  is  sometimes 
defeated  by  an  understanding  with  the  company,  that 
the  time  for  the  payment  of  premium  shall  expire,  and 
after  the  policy  has  been  forfeited  to  have  the  company 
revive  it  or  issue  a  new  policy  on  its  original  terms  as 
to  date  and  amount,  and  made  payable  to  other  parties. 
How  far  this  practice  is  allowable  we  cannot  say,  as  the 
question  has  not  been  tested  in  the  courts.  But  the 
wife  or  children  can  prevent  this  by  paying  or  ten- 
dering the  payment  of  premium  before  the  time  it  is 
due. 

Suicide. 

Hardly  any  subject  has  occasioned  more  litigation  or 
been  more  frequently  contested  than  the  question  whe- 
ther suicide  or  self-destruction  will  avoid  the  payment 
of  the  sum  insured.  Nearly  every  company  has  a  spe- 
cial clause  in  its  policies  that  it  will  hot  be  liable  "  if 
the  insured  die  by  his  own  hand,"  but  when  the  cases 
come  before  the  courts  and  jury,  the  companies  find 
decision  after  decision  rendered  against  them. 


FOR  LIFE  AGENTS.  167 

Suicide  is  thus  defined  by  Blackstone  :  "  A/e/o  de  sf, 
is  he  that  deliberately  puts  an  end  to  his  existence,  or 
commits  any  unlawful,  malicious  act,  the  consequence 
of  which  is  his  own  death.  The  party  must  be  of  years 
of  discretion  and  in  his  senses,  or  else  it  is  no  crime. 
But  this  excuse  ought  not  to  be  strained  to  that  length 
that  the  very  act  of  suicide  is  an  evidence  of  insanity, 
as  if  every  man  who  acts  contrai'y  to  reason  has  no  rea- 
son at  all,  for  the  same  argument  would  prove  every 
other  criminal  non  compos  as  well  as  the  self-murderer. 
The  law  very  rationally  judges  that  every  melancholy  or 
hypochondriac  fit  does  not  deprive  a  man  of  the  capa- 
city of  discerning  right  from  wrong.  If  a  real  lunatic 
kills  himself  in  a  lucid  interval,  he  is  a  felo  de  se  as 
much  as  another  man." 

According  to  this  definition,  insanity  at  the  time  of 
self-destruction  must  be  clearly  proved  and  will  not  be 
presumed.  If  a  man  clearly  understands  the  nature  of 
his  act  and  intends  to  take  his  life,  the  policy  will  be 
avoided,  but  if  he  is  insane,  and  incapable  of  discern- 
ing between  right  and  wrong,  then  the  company  will  be 
liable  to  pay  the  amount  of  the  policy. 

It  has  been  decided  that  ' '  it  never  has  been  antici- 
pated by  any  law-writer  known  to  us  that  the  mere 
transports  of  passion  at  the  time  the  fatal  deed  is  done, 
where  the  mind  remains  unimpaired  in  the  exercise  of 
its  intellectual  faculties,  however  violent  and  overwhelm- 
ing, shall  exonerate  even  from  criminal  responsibility, 
much  less  to  avoid  civil  contracts.  The  sanity  of  the 
suicide,  like  that  of  the  homicide,  is  legally  presumed, 
and  the  evidence  of  insanity  must  be  sufficiently  patent 
to  overcome  both  this  legal  presumption  and  the  evi- 
dence of  sanity,  to  establish  to  the  satisfaction  of  the 
jury  insanity. — 6  Bush.,  268,  Kentucky. 

In  another  case  it  was  decided  that  "  there  is  no  pre- 
sumption in  law,  prima  facie  or  otherwise,  that  self-de- 
struction arises  from  insanity,  and  if,  when  a  person  is 
excited  or  angry,  he  takes  his  own  life,  because  in  the 
exercise  of  his  reasoning  faculties  he  preferred  death  to 
life,  then  the  company  is  not  liable,  as  he  died  by  his 
own  hand. — 1  Dillon,  Kansas. 

Chief  'Justice  Bigelow,  in  a  leading  discussion  on  this 
subject,  decides  that  "the  facts  agreed  by  the  parties 
concerning  the  mode  by  which  the  plaintiff's  intestate 
took  his  own  life,  (cutting  his  throat  with  a  razor,) 
leave  no  room  for  doubt  that  self-destruction  was  in- 
tended by  him,  he  having  sufficient  capacity  at  the  time 
to  understand  the  nature  of  the  act  he  was  about  to 
commit,  and  the  consequences  which  would  result  from 


168  INSTR UCTION  BOOK 

it.  Such  being  the  fact,  it  is  wholly  immaterial  to  the 
present  case  that  he  was  impelled  thereto  by  insanity, 
which  impaired  his  sense  of  moral  responsibility  and 
rendered  him  to  a  certain  extent  irresponsible  for  his 
actions." — 4  Allen,  96  Mass. 

But  on  the  other  hand,  the  authorities  are  very  clear 
that  where  the  insured  is  insane  at  the  time  the  act  is 
committed,  self-destruction  will  not  avoid  the  policy  as 
policies  are  usually  written.  The  words  of  the  proviso,  as 
"  suicide,"  "  dying  by  one's  own  hand,"  "  are  the  words 
not  of  the  assured,  but  of  the  assurers,  introduced  by 
themselves  for  the  purpose  of  their  own  exemption  and 
protection  from  liability  ;  both  in  reason  and  good 
sense,  therefore,  no  less  than  upon  acknowledged  prin- 
ciples of  legal  construction,  they  are  to  be  taken  most 
strongly  against  those  that  speak  the  words,  and  most 
favorably  for  the  other  party."  If  the  company  intend- 
ed that  the  policy  should  be  voidable  in  case  of  self-de- 
struction while  temporarily  insane  or  under  a  fit  of  de- 
lirium, while  the  policy-holder  was  unable  to  distin- 
guish right  from  wrong,  or  know  the  consequences  of 
his  act, the  law  presumes  that  the  company  would  have 
so  expressed  it  in  the  policy.  It  is  as  easy  to  make  an 
exception  of  this  nature  as  it  is  against  death  in  a  trop- 
ical country  where  the  policy-holder  is  forbidden  to  tra- 
vel by  the  terms  of  the  policy,  or  while  engaged  in  min- 
ing or  ascending  in  a  balloon.  The  most  recent  scien- 
tific investigations  disclose  the  fact  that  insanity  is  a 
disease  of  the  brain.  Microscopic  examinations  of  the 
brains  cf  healthy  and  insane  persons  show  a  consider- 
able difference  in  their  cellular  structure,  and  the  ques- 
tion whether  a  person  was  really  insane  or  not  when  he 
committed  self-destruction  may  yet  be  solved  by  the  mi- 
croscope. 

It  follows,  therefore,  that  the  companies,  as  their  po- 
licies are  usually  written,  are  liable  for  the  amount  of 
the  policy  when  the  insured,  in  a  fit  of  insanity,  kills 
himself.  On  this  point  Chief  Justice  Nelson  says  : 
"Speaking  legally,  self-destruction  by  a  fellow  being 
bereft  of  reason  can  with  no  more  propriety  be  ascribed 
to  the  act  of  his  own  hand  than  to  the  deadly  instrument 
that  may  have  been  used  for  the  purpose. " 

"  Suicide  involves  the  deliberate  termination  of  one's 
existence  while  in  the  possession  and  enjoyment  of  his 
mental  faculties.  Self-slaughter  by  an  insane  man  or  a 
lunatic  is  not  an  act  of  suicide  within  the  meaning  of 
the  law ."-4  HiU,  N.  Y.  Rep.,  73. 

The  policies  of  some  companies  are  so  worded  as  to 
exclude  the  payment  of  claims  when  the  insured  dies 


FOR  LIFE  AGENTS.  169 

by  self-destruction,  whether  "  sane  or  insane,"  and  it 
has  recently  been  decided  in  the  Supreme  Court  of  Wis- 
consin, by  Mr.  Chief  Justice  Dixon,  in  a  case  where 
these  words  were  used  in  the  policy,  that  the  parties 
agreed  upon  the  definition  and  limitation  of  the  word 
"suicide"  by  the  conditions  of  the  policy,  and  there- 
fore must  be  bound  by  that  definition.  Hence  the  poli- 
cy was  null  and  void  by  violation  of  its  conditions.* 

Suicide  cases  are  attracting  more  attention  now  than 
formerly.  Cases  have  occurred  where  men  have  made 
careful  inquiries  as  to  what  companies  pay  suicide 
claims,  and  after  insuring  in  them  to  a  large  amount, 
they  put  an  end  to  their  own  lives,  relying  on  the  com- 
panies and  tue  courts  to  give  their  families  the  amount 
insured.  But  the  payment  of  a  claim  where  the  policy- 
holder  committed  suicide  willfully  and  knowingly,  is 
clearly  against  good  morals  and  public  policy,  and 
ought  to  be  prohibited  by  statute  law. 

*  Insurance  Law  Journal,  vol.  iii.,  p.  422. 


THE   END. 


THE  LIBRARY 
UNIVERSITY  OF  CALIFORNIA 

Santa  Barbara 


THIS  BOOK  IS  DUE  ON  THE  LAST  D, 
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Series  9482 


A     000731  171     5 


